Transition to Retirement

In an effort to encourage people to stay in the workforce beyond their preservation age (currently 55 and progressively moving to 60 years), the government has introduced new transition to retirement regulations.

The regulations which came into effect on 1 July 2005, allow people who have reached their preservation age to reduce their work hours but not necessarily their income by giving access their superannuation in the form of a non-commutable income stream while still continuing to work.

However, it is not necessary to reduce your work hours in order to gain access to these income streams, the choice is yours. Under the old rules it was necessary to retire before access could be gained. There is no limit on the amount of superannuation that can be converted and there is no work test.

A non-commutable pension can be rolled back into your superannuation fund if you wish but it cannot then be cashed out until a normal condition of release is met such as retirement or attaining age 65.

The motivation of the government is to encourage people to stay in the work-force longer. The ultimate goal is to preserve individuals superannuation savings and so minimise their reliance on social security, specifically the age pension.

It should be noted that the ability to pay out this type of income stream depends on the trust deed of each fund. Since many of these trust deeds may need to be changed, you need to make enquiries of your own fund to see if the option is available. If you would like more information simply follow this link: Enquiries and mention "Transition to retirement".

Source: Personal Wealth

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