Q. I have recently commenced a Transition to Retirement Allocated Pension.  I am 60 years of age and plan to retire at 65.  What are the restrictions on how much income I can access? Are there restrictions on what I can use the Pension income for?  I have heard that the income must be used solely for my benefit.  But what does that mean?

A. You are entitled to commence an Allocated Pension from age 55.  Income restrictions do apply as you have not retired and continue to work.  When you are under 65 years of age, you must draw between 4% and 10% of the value of the Allocated Pension at the 30 June each Financial Year.

Pro rata minimum income rules apply if the commencement of the Allocated Pension is before 1 June of the Financial Year.  If the Allocated Pension is commenced after 1 June in the Financial Year, no minimum payment is required.

Income received from the Allocated Pension is tax free as you are over age 60. Income and Capital Gains earned within the fund are also tax free.

Superannuation is meant to be for the benefit of the member.  So provided you benefit as a result of the use of the funds, you can use the income received for any purpose.

Common examples of the use of a Transition to Retirement Allocated Pension would be to supplement income, enable you to reduce working hours to ease into retirement, provide the capacity to increase Salary Sacrifice Superannuation contributions and provide an annual lump sum to reduce debt mortgage.


Follow Andrew on Twitter @AndrewHeavenFP.  This article was originally published in The Australian.