Pre-requisites for conversion
Self-managed superannuation Fund members may convert an Accumulation Account to a Pension Account or a Transition to Retirement Account (TTR):
- when they turn 65, or
- when they reach preservation age and retire
All members converting to pension or TTR, or otherwise seeking to make withdrawals from their super account, must meet the legal conditions of release.
Conversion is at the discretion of the member and may occur at any time after age 65 or not at all.
Members are entitled to retain their account in Accumulation mode until death.
Preservation age varies according to date of birth.
Note that your Preservation Age Is not the same as the legislated retirement age.
Retirement age is not fixed in Australia and members can generally make their own choice as to when they retire depending on their financial circumstances.
The qualifying age for an aged pension is now 65 and will gradually increase to 67 by July 2023.
Early access to superannuation funds is possible only in limited circumstances, such as if a member is diagnosed with certain specific medical conditions or can evidence extreme financial hardship.
Members may convert to a Transition to Retirement Account (TTR) while continuing to work, provided that:
- Their Fund Trust Deed permits it, and
- At least a small balance remains in their accumulation account when commencing the TTR, and
- If under 65, they draw down a pension of between 4% and 10% of the TTR account balance each financial year and do not withdraw any lump sum, and
- If over 65, they draw a minimum amount that varies with age: 5% if you are between 65 and 74; 6% between 75 and 79, 7% between 80 and 84, 9% between 85 and 89, 11% between 90 and 94, and 14% if you are 95 or older, and
- They do not draw more than 10% of the balance in a TTR and do not draw lump sums
A TTR pension can be rolled back into a member’s superannuation account at any time.
A TTR pension can top up income for a member who has opted to reduce work hours or has had their hours cut back. The member can continue to benefit from employer contributions to build their retirement savings. These contributions can help to replace the money they draw and may even allow their total fund balance to grow while they enjoy an additional income stream over and above their wage or salary. There may be some tax benefits.
Members should seek professional advice before opting to start a TTR, including verifying social security entitlements and checking the terms of any life insurance policy their Fund may have arranged for their benefit.