Transition-to-retirement pensions explained

7 min read · General information only

A transition-to-retirement pension, usually shortened to TTR, lets you draw an income from your super while you're still working — without having to retire or meet another condition of release. It's one of the more misunderstood corners of superannuation, partly because what it's good for has changed a few times over the years.

How it actually works

Once you reach your preservation age (which is 60 for anyone born after June 1964), you can move some or all of your super into a TTR income stream. From there, you're able to draw between 4% and 10% of the account balance each year, while continuing to work and continuing to contribute to your accumulation account.

The mechanics are simple enough. The strategic value comes from what you do with it — and that depends heavily on your age and circumstances.

The two main ways people use it

• Salary sacrifice plus TTR drawdown ("transition to retirement strategy"). You increase your salary sacrifice contributions into super, which reduces your take-home pay, then top up your income using TTR pension payments. Because pension payments to those 60 and over are generally tax-free, and the extra super contributions are taxed concessionally rather than at your marginal rate, this can improve your after-tax position while growing your retirement savings — without changing your day-to-day cash flow.
• Straightforward income top-up. If you want to reduce your working hours but keep your income steady, a TTR pension can fill the gap between a part-time wage and what you were earning full-time.

Who tends to benefit

• People aged 60+ still working full-time, wanting to boost concessional contributions without a pay cut.
• People wanting to reduce hours in the lead-up to retirement while keeping household income roughly the same.
• Business owners looking for a tax-effective way to draw more from super while still generating business income.

What to weigh up first

A TTR pension isn't automatically worthwhile — the benefit depends on your marginal tax rate, your existing super balance, how much you can genuinely afford to sacrifice from salary, and how many years you have left before full retirement. For some people, particularly those on lower incomes or with smaller balances, the administration and reduced flexibility isn't worth it.

It's also worth checking whether your fund charges extra fees for running a pension account alongside an accumulation account, and understanding what happens to the TTR pension once you do meet a full condition of release (it typically converts to a standard, tax-free account-based pension).