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How do I fund semi-retirement?

What is a TTR pension?

A transition to retirement (TTR) pension is a type of account based pension that can be started with your super if you have reached your preservation age, opens in new window, but have not yet retired.

How does it work?

A TTR pension allows you access to some of your super when you’re approaching retirement. This means you can supplement your income with the super you’ve accumulated throughout your working life. A TTR pension is an account based pension in ‘pre-retirement phase’. This means that tax on earnings in your TTR will be at a maximum rate of 15%. Once you’re 65 or notify your super fund that you’ve retired or meet certain other conditions of release, your TTR will enter retirement phase where earnings are tax-free.

What are the benefits?

  • Receive an income to maintain your living standard when winding back your work.
  • Pay less tax: TTR pension payments attract a 15% tax offset between preservation age, opens in new window and 59 and are tax-freeView disclaimer1 at age 60 or over.

Important things to consider

  • You’ll need to draw a minimum income each year, which is 4%² of the account balance per annum under age 65. 
  • The maximum income you can draw each year is 10% of the account balance. You can’t take a lump sum until you meet a full condition of release.
  • Once your TTR is in retirement phase it is also assessed against your transfer balance cap. This cap limits the amount you can have in retirement phase and penalties may apply if this is exceeded.

Case study

In year one Before strategy After strategy
Pre-tax salary $80,000 $48,000
TTR pension income Nil $20,680
Total pre-tax income $80,000 $68,680
Less tax payable³view disclaimer ($16,987) ($5,667⁴view disclaimer)
After-tax income $63,013 $63,013

Disclaimer1. Assume the TTR pension is commenced from a taxed super fund.

Disclaimer 2. The minimum withdrawal has been reduced by 50% (down to 2%) for the 2021/22 financial year, but will return to 4% from 1 July 2022 onwards.

Disclaimer3. Tax payable is based on the 2021/22 rates and thresholds. 

4. Tax on $48,000 as TTR pension income is not taxable. 


What next?

To find out more please visit What is a transition to retirement pension?


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Tax disclaimer

Any general tax information on this website is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.