Mark Gleeson discusses transition-to-retirement pensions, and if they'll still stack up after June.
Under new superannuation rules beginning in July 2017, the earnings within a transition-to-retirement (TTR) pension will be taxed at 15 per cent. In this video Mark Gleeson, ANZ technical services manager, explains how financial advisers may still be able to find tax savings for their clients.
From July this year the tax exemption on transition-to-retirement earnings will be removed, but financial advisers may still be able to seek effective solutions with a TTR for their clients.
The tax treatment of pension payments will not change, but the earnings within a TTR pension will be taxed at 15 per cent from July, regardless of their commencement date.
But Gleeson says clients shouldn’t necessarily roll back their TTR pension into superannuation's accumulation phase.
“It’s on a case-by-case basis,” Gleeson says. “If [the client is] aged 60 or more there might still be merit in keeping the TTR pension going. If they are under age 60 then it might be more worthwhile looking at the different options available.”
Gleeson gives the example of a 61-year-old with $200,000 in superannuation and $80,000 in income who switches on a TTR pension income of just over $11,000 post-July. By salary sacrificing some of his income he ends up no worse off from a net income point of view than if he had not switched on the TTR. And he still enjoys a tax saving of almost $3500 after the first financial year.
He also discusses some other implications of the new superannuation rules, such as the reduced concessional contributions cap.