Transition to retirement pension is a unique way to access a part of your superannuation in spite of working somewhere. Since July 1, 2005, it has become quite possible for a person to draw on his/her superannuation savings and working concurrently, only if the person attains the preservation age, which is currently 55 years or above. Besides this, the person also needs to take his benefits as a non-commutable pension. As you are drawing some of your superannuation as pension, the transition retirement pension would allow you to take advantage of some of the tax concessions earmarked for the pensions.
Pros and Cons of Transition to Retirement Pension
On one hand, there are some distinct benefits of transition to retirement pension, but on the other hand, it has got some drawbacks as well. As you are drawing a part of your superannuation while still working, you are earning more than your usual earning. Besides this, you are also getting some tax concessions which can only be availed of by those who draw pensions. Therefore, you are also saving more and hence your earnings further go up.
On the other hand, transition retirement pension also has some negative sides at the same time. The greatest threat of transition to retirement pension is the possible impact on the future benefits. It may also have an impact on the insurance arrangements, as there is every possibility of cease or decrement of existing life insurance cover. Besides this, if there are any contribution arrangements, the sum insured may get reduced. You may also have to go for medical examinations, which will call up new conditions further.
Transition to Retirement Pension Rules
Following are some basic rules for availing transition to retirement pension:
You need to reach at your preservation age, which is currently 55 years and above. However, you must be under 65 years of age.
- You must be working. However, it hasnít been specified the minimum or maximum hours that one must work upon in order to avail it.
- One can opt for a maximum of 10 percent of his/her account balance yearly.
- You can convert this to a lump sum at the time of your retirement.