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How old do I need to be?
It’s an exciting time when you’re finally able to access your retirement savings. Generally, once you reach your preservation age, you’re eligible to start a Transition-To-Retirement (TTR) pension. If you also retire at your preservation age, you’re eligible to start an account-based pension (also called an allocated pension) – which offers the added flexibility of lump sum withdrawals.
Your preservation age will be between 55 and 60, depending on your date of birth. To be considered ‘retired’, you must stop your paid work (with no intention of working 10 or more paid hours per week); or you must cease paid work once you’re 60 or above. Otherwise, you can withdraw your super money once you turn 65 years of age; whether you’re retired or not.
What can I do with the money?
Your main options are to either convert it to an income stream; or take it all out as a one-off lump sum payment. Alternatively, you can do a combination of both.
Most people choose to convert their super to an income stream such as an account-based pension (allocated pension). You can take advantage of flexible income payments, while being able to make lump sum withdrawals. Your money remains in the underlying investments.
You can choose from three main types of income streams:
1. Transition-To-Retirement (TTR) pension
You can set this up once you reach your preservation age, whether or not you’re still working. It's a way to access some of your super, and keep working – while reducing your working hours.
Alternatively, you might pay less tax if you combine a TTR pension with salary sacrificing; or by making personal deductible contributions. It's a good idea to speak to a financial adviser about whether it’s right for you.
2. Account-based pension (allocated pension)
You can set this up once you reach your preservation age and have retired, or once you turn 65. Your super remains invested and your super fund will make regular withdrawals for you and pay them into your bank account.
The payments will continue for as long as there’s money in your account. You can also choose to take out extra money whenever you need it.
3. Non-account-based pension
You can set this up once you reach your preservation age and have retired, or once you turn 65. An example of this is an annuity. You use your super to buy a product that will pay you a guaranteed amount, for either a fixed term or the rest of your life.
Withdrawing your money
Whichever type of income stream you choose, you’ll receive regular payments from your super fund, account provider or life insurer.
If you have an income stream with us, you can choose to receive your payments monthly, quarterly, half-yearly or yearly. If you have an account-based pension (allocated pension), these may offer either weekly or fortnightly options.
The Australian Tax Office sets the minimum percentage you must withdraw from your pension income stream each year (based on your age). For TTR pensions, there’s also a maximum percentage of 10%. The best part is that once you’re over 60, any withdrawals you make from our funds – either as an income stream or lump sum – are tax free.
How an income stream affects the Age Pension
Under both the income and assets tests, your income stream will be assessed to determine your eligibility for the Age Pension. Along with your other income and assets, it could reduce the amount you’re eligible to receive.
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Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) is the trustee of the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and issuer of FirstChoice range of super and pension products. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) is the responsible entity and issuer of products made available under FirstChoice Investments and FirstChoice Wholesale Investments.
Information on this webpage is provided by AIL and CFSIL. It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the target market determinations (TMD) for our financial products at https://www.cfs.com.au/tmd which include a description of who a financial product might suit. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. You can get the PDS and FSG at www.cfs.com.au or by calling us on 13 13 36.