Reasons to start Transition to Retirement Pension – TTR
Usually, today’s topic is discussed at the beginning of the new financial year, but I thought starting a New Year 2026 also warrants this discussion. After all, we all are trying to start a new year on a positive note, and Transition to Retirement Pension could be a solution for your financial dilemma or alternatively improvement of overall financial position when preparing for retirement.
So today, we are discussing Transition to Retirement Pension or as we call it – TTR in short.
But let’s start first with an explanation what a TTR pension is.
TTR is a type of an income stream that has partial rules of an income stream and partial of a superannuation accumulation fund.
You can commence a TTR pension if you have reached the age of 60, but you are not eligible to start a true retirement income stream, such an account-based pension.
TTR has partial rules of and income stream, because once commenced you can start drawing a regular income from it. But, unlike and account-based pension, it has income payments limits, so it has a maximum income limit of 10% of the starting balance, or a balance of the fund on 1st July each financial year. Also, unlike an account-based pension, you cannot draw any lump-sum capital from your TTR. So it as you can see, it has many restrictions.
TTR also has partial rules of a super accumulation, which is up to 15% tax on earnings. Again a retirement pension income stream such as ABP, no longer pays any internal tax on earnings, so most certainly it is a superior form of an income stream.
But, if you have not reached the conditions of release, TTR pension is your best option if you want to commence and income stream while working.
But in both cases, TTR Pension and ABP pension, you will not pay tax on pension payments received from the fund.
What are the main reasons to start a TTR pension?
1. Replacing income when cutting work to part-time for example.
With cutting your working hours, obviously your pay will also decrease, so many people will supplement that income with pension payments received from TTR. Unlike your income earned from work, your TTR pension payments are tax-free (unless paid from an untaxed fund).
2. Reduce your income tax and grow your super
This strategy works best for high income earners due to their high marginal tax rate but will work for anyone with a tax rate of 30% or higher.
Here is the table from the ATO side of our current income tax rates:
As you can see from the table, income above $45,000pa introduces tax rate of 30% plus Medicare. So every dollar contributed to super over and above $45,000 earnings will only pay 15% contribution tax and tax within super, rather than 30% plus Medicare outside of super.
If you would like to learn more about the Salary Sacrifice strategy and its benefits, please read: Concessional contributions to super – Salary Sacrifice
An even greater benefit can be achieved if you combined a salary sacrifice and catch-up concessional contributions. I recorded the video on this topic: Catch-up carry-forward concessional contributions, so you are welcome to watch it, but it is already 4 years old, therefore I would recommend asking for the full advice. This is one of the move complex superannuation strategies, so please make a booking for a meeting with a financial planner from our practice to assist you in full understanding of it.
3. Pay down mortgage
This is a great strategy to reduce your mortgage as soon as possible. After all, it should be your goal not to retire with any mortgage. If you still have a mortgage outstanding, please ask for the advice how to reduce and hopefully repay it asap.
Those are main reasons why people start a TTR Pension, but there are many others depending on your personal circumstances. If you believe TTR is the way to go for you, or you would like the full assessment if TTR is beneficial in your situation, as I mentioned before, organise a meeting with a financial planner from About Retirement.
By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement
