Ease into retirement

The "Transition to Retirement" rules allow older workers to access their super before they retire.
Learn more
  • Updated:17 Jan 2008


If you're 55 or over you can access your super to start an income stream without having to retire. This change came in under the Transition To Retirement rules, which have been in effect since July 2005. Previously you had to permanently retire to access your super in any form.

Strategies include:

  • Reducing your work hours and maintaining your standard of living by supplementing your wages with an income stream from your super.
  • Accessing tax savings and/or further building your super savings by salary sacrificing to super and replacing the sacrificed income with an income stream drawn from your super.
  • Using an income stream to improve your financial position for example, to increase your mortgage repayments.

Please note: this information was current as of January 2008 but is still a useful guide to today's market. For more recent information, see our article on Income for life 2010.

How to access your super

You can use part or all of your super balance to buy a retirement product. For most people a non-commutable allocated pension will be most attractive because of its flexibility. These products are called income streams as they give you an income of regular (for example monthly) payments. The income stream must be 'non-commutable', which means you can't take your super as a lump sum until you permanently retire or reach the age of 65.

The main point of difference between a non-commutable allocated income stream and a normal allocated stream is that you can't cash it in while you use it as a transition to retirement product.

A non-commutable income stream is flexible.

  • Once you reach 65 or retire permanently it converts to a normal allocated income stream and you can get a lump sum at any time.
  • If you decide you don't need the income from the allocated income stream (for example, because you've returned to full-time work), you can usually roll over your benefits back into your super fund.
  • You can choose the amount you want to receive in between the prescribed minimum and maximum amount: a percentage of the balance of your non-commutable income stream based on your age. For example, if you’re aged 55 the minimum is 4% and the maximum amount is 10%.

How to avoid the traps

  • Get expert advice on whether transition to retirement is suitable for you. The best strategy will depend on your personal circumstances.
  • Crunch the numbers, especially if you want to use the strategy for tax-savings. How much tax will you really save, how much extra super will you have, and how much will the advice and product fees cost?
  • Should you wait until it’s tax-free? After age 60 any income from a superannuation income stream will be tax free. If you start transition to retirement earlier you may have to pay tax. Check with the ATO.
  • Get the right product. If you want the flexibility to go back and forward between income stream and super if your circumstances change, make sure the product allows this.

Your financial adviser may recommend rolling over your super into another fund or opening a self-managed super fund, for example if your current fund doesn't offer a transition-to-retirement product. Ask them to compare the fees and performance of the old and new fund (especially if you're currently in a good industry or corporate fund) to make sure you're really getting a good deal.

More information

Australian Taxation Office (ATO)
Phone: 131020

National Information Centre on Retirement Investments (NICRI)
Phone: (02) 6281 5744 or 1800 020 110



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