28 Nov How a Transition to Retirement (TTR) Pension Works

How a Transition to Retirement (TTR) Pension Works

As Australians work longer, it’s common to want more flexibility—perhaps moving to part-time work, reducing stress, or easing toward retirement. The challenge? A drop in work hours often means a drop in income.

A Transition to Retirement (TTR) pension can help bridge this gap.

What is a TTR Pension?

A Transition to Retirement (TTR) pension lets you access part of your super while you’re still working, once you’ve reached your preservation age (between 55 and 60 depending on birth year; age 60 for most people today).

The key idea:
Use some of your super to top up your income while reducing work hours—without fully retiring.

How it works in practice

1. You convert a portion of your super to a TTR pension.
2. You continue working (full-time or part-time).
3. The TTR pension makes regular payments to supplement your income.
4. Your super may continue to grow, especially if you keep contributing through employer contributions or salary sacrifice.

Payment limits

While in TTR mode (before fully retiring):

• Minimum withdrawal: 4% of the account balance per year
• Maximum withdrawal: 10% per year

(These settings prevent people from drawing down too quickly while still employed.)

Tax benefits

• Investment earnings inside a TTR pension are taxed at 15% (unlike 0% for standard retirement pensions).
• Withdrawals after age 60 are tax-free, making top-ups very efficient.
• Combined with salary sacrifice, many people use TTR to boost their net after-tax income or even increase their long-term super balance.

Why Consider a TTR Pension?

Common reasons include:

• You want to reduce work hours without reducing your lifestyle.
• You want to supplement income while caring for family or reducing stress.
• You want to use a TTR strategy to optimise tax and build super through salary sacrifice.
• You’re easing into retirement instead of making a hard stop.

Case Study: Sarah, age 60 — Moving to Part-Time While Keeping Her Lifestyle

Background

Name: Sarah
Age: 60
Current salary: $100,000 (full-time)
Super balance: $450,000
Goal: Reduce to three days per week (60% workload) for the next 3–5 years
Concern: Her new salary (~$60,000) won’t cover her current lifestyle

Step 1: Moving to part-time work

Her income drops from $100,000 → $60,000.
After tax, this reduces her disposable income by roughly $25,000–$30,000 per year.

Step 2: Starting a TTR pension

Sarah moves $200,000 of her super into a TTR pension.
She can withdraw between:

• Minimum: $8,000 (4%)
• Maximum: $20,000 (10%)

Step 3: Topping up her income

She chooses to withdraw $20,000 tax-free, closing most of the gap between her old and new income.

Now her combined income looks like this:

• Part-time salary: $60,000
• TTR pension payments: $20,000 (tax-free)
• Total income: $80,000
• After-tax income: Very similar to what she had when earning $100,000 full-time.

Step 4: (Optional) Salary sacrifice optimisation

To keep building her super, Sarah salary sacrifices $10,000 from her part-time salary into super.
Because the TTR pension payments are tax-free, she still keeps roughly the same lifestyle income.

Outcome

Sarah achieves:
✔ More personal time and reduced work stress
✔ Lifestyle preserved
✔ Continued employer contributions and potential growth in super
✔ Tax-effective strategy while easing into retirement

Important Considerations

• You cannot withdraw lump sums from a TTR pension until you retire or meet another condition of release.
• Investment earnings in a TTR pension are taxed at 15%, unlike full retirement pensions (tax-free).
• Super can fluctuate with markets, so careful investment selection matters.
• A TTR is most effective when combined with salary sacrifice—it’s often the tax synergy that delivers the biggest benefit.
• It’s best used with advice, because the right balance between working income, pension withdrawals and contributions can materially affect long-term outcomes.

In Summary

A Transition to Retirement pension gives people flexibility in the final stage of their career. It allows you to reduce your work hours while maintaining your lifestyle—by using part of your super tax-effectively.

Sarah’s example shows how someone at age 60 can move to part-time work and still enjoy the same level of spending, without having to retire completely.

Important information and disclaimer

The information provided in this document is general information only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide.

FinPeak Advisers ABN 20 412 206 738 is a Corporate Authorised Representative No. 1249766 of Spark Advisers Australia Pty Ltd ABN 34 122 486 935 AFSL No. 458254 (a subsidiary of Spark FG ABN 15 621 553 786)