With the Federal Government’s proposed changes to the transition to retirement (TTR) pension to take effect from 1 July 2017, those with existing arrangements should review them to avoid any adverse impact on their retirement funds.
Following changes in the 2016 Federal Budget, from 1 July 2017, transition to retirement (TTR) pensions will no longer receive a tax-free status on the investment earnings of pension accounts. The investment earnings will be taxed at 15 per cent for both new and existing TTR arrangements.
Although the tax benefits of TTR pensions will be removed, some attractions will remain. For those who have been receiving a TTR pension, if they retire or change jobs after age 60 they can access their existing super balance in an unrestricted way, as the pension converts to a full account-based pension.
The annual TTR pension will remain tax-free for those over 60, however, those below this age will be discouraged to start or continue a TTR arrangement as they will be subjected to 15 per cent tax on all investment earnings.
For those over 65, commencing a pension with a balance of up to $1.6 million will generate a tax-free status.
Those approaching retirement should check if their TTR pensions are eligible to be converted into full account-based pensions.