Conditions of Release of Superannuation Benefits & Starting a Pension

Conditions of release

A member of a superannuation fund can access his or her benefits after attaining preservation age which starts from the age of 55. There is a gradual increase in the preservation age as shown on the table below:

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–        financial hardshipOnce a member has retired, the benefits can be paid out as a pension or as a lump sum amount. There are other circumstances for the condition of release that include:

–        compassionate grounds

–        total and permanent disability, or

–        death

Types of pensions

The two most common superannuation pensions are:

–        transition to retirement, and

–        account based pension

Transition to retirement pension (TTR)

Individuals may start a transition to retirement (TTR) pension while they are still working. This option would provide a regular income from the transition to retirement (TTR) pension account, but also would allow the individual to make salary sacrifice contributions to boost their superannuation fund balance prior to retirement. Transition to retirement (TTR) can be started after reaching the preservation age of 55 provided that the member is still employed either full time or part time. There are certain limits for withdrawal between 4 – 10 % per year from this pension account. After the age of 65 the transition to retirement (TTR) will be converted to an account based pension and there are no limits on the maximum amount of withdrawal.

Account based pension

An account based pension is created from the superannuation amount held in a superannuation fund and can commence once the person has met the conditions of release. It allows the retiree to receive a scheduled income stream and if the person is over the age of 60 all investment income derived from the pension account are tax-free. There is a minimum pension amount to be drawn down every year and there is no maximum limit.

Lump sum payments

A superannuation lump sum payment can be paid to an individual if the amount is unrestricted non-preserved, in other words, if the individual has satisfied the condition of release. All lump sum benefits paid to an individual over the age of 60 who has retired will be tax free. The tax treatment of lump sump amounts paid before retirement and before attaining the age of 65 and still working may not be all tax free.

Should you require further information on these matters please contact us.