Pre-retirement Pension accounts
If you have reached your preservation age and you're still working, you can open a Pre-retirement Pension account and receive income from your super. Use it to top up your income while working less. Or, combine a pension with salary sacrifice to boost your super the tax effective way.
You should consider the Pension accounts PDS in deciding whether to acquire, or continue to hold, this product.
You'll find the key features of this type of account in the table below.
| Feature | |
|---|---|
| Income payment amount | Calculated based on your account balance and minimum pension factors, each year. Maximum of 10% of account balance per year. |
| Income payment frequency | Quarterly, half-yearly or annually. |
| Minimum investment amount | $50,000 |
| Investment choices | Select one option from a range of investment choices. If you do not make a choice, your money will be invested in the Balanced option. You can switch investment options up to four times each financial year. |
| Lump sum withdrawals | Not allowed. |
| Defined Benefits Fund members | You need to close your defined benefit and transfer to the Accumulation Benefits Fund, if the amount you want to start a pre-retirement pension with is higher than your accumulation balance. |
Salary sacrifice and pre-retirement pensions
Salary sacrificing your pay to super, and taking income from a Pre-retirement Pension account instead, could make a big difference to your retirement benefit. That's because income from your super is tax free once you're 60, and for most people, more tax effective than regular income between the ages of 55 and 59.
The example below sets out how this strategy can work. Contact us to see an example tailored to your situation.
Bill, age 60, earns $50,000 p.a. and is salary sacrificing his 6% standard member contribution. If he increases his salary sacrifice contributions from $3000 to $20,000 p.a. and replaces the drop in take home pay with $13,245 p.a. from a pre-retirement pension, his overall super balance would be $4330 better off after a year - without any less in his pocket each fortnight.
| Bill | Higher salary sacrifice with pension income (p.a.) | Salary sacrifice and employment income (p.a.) |
|---|---|---|
| Salary | $50,000 |
$50,000 |
| Less salary sacrifice to super | $3000 |
$20,000 |
| Less tax | $8805 |
$4050 |
| Less after-tax voluntary contribution | $0 |
$1000 |
| Plus super co-contribution | $0 |
$1500 |
| Plus pre-retirement pension income | $0 |
$13,245 |
| Net income | $38,195 |
$38,195 |
| Amount added to super after contributions tax | $2550 |
$19,500 |
| Amount taken from super | $0 |
$13,245 |
| Overall benefit to super | $2550 |
$6255 |
