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Transition to Retirement (Pre-retirement pension)







What is it?


A popular tax saving strategy that involves converting your super into a pre-retirement pension, much the same as when you retire but with restrictions on how much you can access.

You then draw a concessionally taxed income from the pension, while at the same time salary sacrificing into your super fund to attract further tax concessions.

The end result is tax savings that accumulate in your super, and boost your retirement nest egg....


How much tax will I save?


As there are so many variables to this question (your salary, the amount of money in your super fund, how many years to retirement) this can only be answered by a personal analysis of your situation.

There are also other factors which in some circumstances may deem this strategy to be inappropriate; therefore it is essential to seek personal financial advice.





This strategy could enable you to:



NOTE:


While a transition to retirement strategy may be simple in concept, the calculations required to assess its suitability to your situation and implementing it are not.


There are a range of variables to consider, such as:


Our expert advice will consider all these variables to determine the most suitable outcome for you.


Don’t miss out on these savings - REGISTER YOUR INTEREST NOW!

To find out if this strategy is suitable for you and how much you could save, click here to book a free, no obligation discussion.


Our initial phone call will discuss your current situation, and determine whether an appointment to discuss further will be beneficial.


If we believe your current situation does not warrant this strategy, we will inform you immediately so as not to waste your time.


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Frequently Asked Questions


            Click HERE to see this strategy discussed on the ATO website



SUPER IS NOT AN INVESTMENT!!!

Super is merely an ownership structure with special tax and preservation rules in which to place our investments, much like placing investments within a trust or company structure.

The investment itself is determined by the asset allocation; ie shares, property, fixed interest or cash. YES, your super fund can be invested in cash. Many fund managers use a default option that is heavily invested in shares, hence the confusion. But if this doesn’t suit you, you can change it. We will also discuss your investment mix and help you choose the right one; but understand that this is independent of a transition strategy which is a tax saving mechanism irrespective of your investment mix.



We charge our services as a fixed up front fee.

No fund manager commissions.

No asset based commissions.

No trail commission.




How does it work?


The strategy essentially involves three steps, with each step contributing to the tax savings in a different way.


Step1 - The balance of the super fund is converted, or rolled over, into a pre-retirement pension. Earnings on super funds are taxed at 15% while earnings on pensions are tax free. So there’s your first tax saving.


Step 2 - Funds are drawn from the pension at a reduced tax rate (tax free if you are over 60). The income drawdown is limited to 10% of the pension balance each year. As this income is taxed at a reduced rate from your regular salary, this gives you your second tax saving.


Step 3 - You then contribute ‘back’ into super via a salary sacrifice arrangement. However, unlike a regular salary sacrifice, there is no need to have a reduced income - because you are drawing an income from the pre-retirement pension. Furthermore, the salary sacrifice is only taxed at 15% in the super fund, rather than your marginal tax rate had you not done this. So there’s tax saving number three!


The strategy in practice

Source: Colonial First State. This table is for illustrative purposes only. Assumptions. Earning 7.7% pa after fees and before taxes with inflation at 3%. Using 2009–10 income tax rates. Minimum pension is paid as an allocated pension. Superannuation guarantee contributions are 9% of gross salary before any salary sacrifice. All superannuation contributions and pension payments are made regularly throughout the year. A change to any of the assumptions and variables can provide significantly different results.


Important information. This case study is a hypothetical story based on our understanding of typical customers and is for illustrative purposes only.


Example 1 - Continue working full time


Example 2 - Working Part-time

Important information. This case study is a hypothetical story based on our understanding of typical customers and is for illustrative purposes only.


Source: Colonial First State. This table is for illustrative purposes only. Assumptions. Earning 7.7% pa after fees and before taxes with inflation at 3%. Using 2009–10 income tax rates. Minimum pension is paid as an allocated pension. Superannuation guarantee contributions are 9% of gross salary before any salary sacrifice. All superannuation contributions and pension payments are made regularly throughout the year. A change to any of the assumptions and variables can provide significantly different results.






How much could YOU save?

Register here to find out.

Speak to our Certified Financial Planner

Book a call back here or phone 03 9010 5057

Request a call back here to discuss the benefits of this strategy for YOU.

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FREE report

Pre-retirement pensions ‘In a nutshell’ How to pay less tax without reducing your income or taking extra risk.

Available to: Anyone who has reached their ‘preservation age’ - age 55 if you were

born before 1 July 1960.