Transition to Retirement Pensions

Transition to retirement pensions became available on 1 July 2005. They can be taken from a self managed fund. The characteristics of these pensions are:

  • The pension must be an account based pension.
  • The pension can only start at age 55 or the preservation age. The member does not have to wait until age-pension age or 65.
  • The member does not have to retire, cease work, change jobs or reduce hours of work.
  • The minimum pension is 4% of the member account balance and the maximum pension is 10%. Reduced minimum of 2% applies for 2009, 2010, 2011 and 2012 financial years.
  • Full range of investments can be used, from fixed interest to shares.
  • Upon death, the remaining capital can be paid to a beneficiary or to an estate (as a lump sum).
  • If required, a pension can be paid on death (instead of a lump sum) but only to a dependant.
  • Once the member reaches normal retirement age (65) or retires (if sooner), lump sum withdrawals become possible and the maximum pension restriction is removed.
  • Since the member has not retired, additional contributions can be made. A Separate member account within the fund is required.
  • The portion of fund assets used to support the pension is given tax exempt status.

However, there is one major restriction or disadvantage. This is:

  • The pension is non-commutable – no lump sum withdrawals are allowed. However, once the member retires or turns 65, the pension can be commuted as no maximum pension then applies.

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