THERE’S A LOT TO LEARN ABOUT RETIREMENT…

When you retire, you can either take your super in cash as a lump sum, or you can move it into a pension to provide you with an ongoing income stream.

Depending on your circumstances, a pension can be an ideal investment because:

• you do not pay tax on investment earnings
• the money you receive as payments from your pension is tax-free after age 60, plus there are tax breaks for those over 55
• you receive a rebate on annual pension payments
• you can choose from a range of investment options which can be changed as required.

You may still receive the Age Pension and other government benefits.

Most super savings are preserved, which means you generally can’t withdraw your money until you reach:

• your preservation age and permanently retire from the workforce
• age 60 and leave an employer on or after that age
• age 65 (regardless of your work status).

If you reach your preservation age but have not yet retired, you can access your super as a regular income stream through a transition-to-retirement strategy.

Your preservation age is the age at which you can access your preserved super benefits, provided you have permanently retired from the workforce (or met other select criteria). It is based on your date of birth:

If you take your super after age 60, you won’t pay any tax. If you take your super before that, the amount of tax you pay on your super when you retire depends on:

• your age
• whether you take your money in a lump sum as cash or transfer it to an income stream, such as a pension
• the individual components that make up your balance.

After age 60

All super and pension payments are tax-free. If you purchase a pension before age 60, your pension payments will become tax-free when you turn 60.

Under age 60 – lump sum

If you have reached your preservation age, haven’t yet turned 60 and decide to take your super as a lump sum, your tax is based on the components of your balance:

• tax-free component – no tax
• taxable component
• tax-free amount – no tax (check rates and thresholds for the current amount)
• amounts above the tax-free amount are taxed at 15%.

Under age 60 – pension

If you have reached your preservation age, haven’t yet turned 60 and decide to take your super as a pension, your tax is also based on the components of your balance:

• tax-free component – no tax
• taxable component
• tax-free amount – no tax (check rates and thresholds for the current amount)
• amounts above the tax-free amount are taxed at your marginal tax rate.

If you take a pension, you receive a 15% tax rebate on your annual pension payments.

A transition-to-retirement strategy allows you to access your super even when you’re working.

Once you reach your preservation age, you can move your accumulated super into a pension. It means you will have both a super account and a pension account at the same time.

This will enable you to keep building your super through contributions, while receiving regular income payments from your pension account.

The main ways you can use a transition-to-retirement strategy are to:

• increase your super savings and reduce tax through salary sacrifice arrangements
• decrease your working hours while maintaining your income.

Generally, if you are still working and under 65 years of age, then you can only withdraw up to a maximum of 10% of your pension account balance each year.