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Account Based Pensions (TRIS)

Features and benefits of an Account Based Pension

  • Minimum pension amounts are calculated annually
  • No maximum pension if you have retired or have met a condition of release
  • Can be commuted back to a lump sum
  • Allows for a more flexible asset allocation
  • Capital can be exhausted (spend all the money)
  • Pension assets are exempt from income and capital gains tax
  • The trustees receive a refund of all franking credits
  • Those under age 65 and not retired can access their benefit via a “transition into retirement” income stream

Transition to Retirement Income Streams (TRIS)

A TRIS is an income stream that allows a member to access their preserved benefit while still employed, providing they have reached preservation age (currently age 56 - refer table below) and have not yet reached age 65.

Commencing a TRIS will effectively allow a member to reduce their working hours and maintain their income by topping up their part-time income with a regular ‘income stream’ from their SMSF.

Until recently, members could only access their SMSF balance once they turned 65 or retired. This meant it was difficult to reduce their working hours and still maintain their standard of living. A member can commence a TRIS with all or part of their superannuation entitlement.

How does transition to retirement work?

Once a member commences a TRIS they will have 2 accounts within their SMSF. One being their income stream account and the second being an accumulation account accepting future contributions. A transition into retirement income stream has both a minimum and maximum pension requirement between 4% - 10% of the members pension balance.

Percentage factors for Account Based Pensions

Age of BeneficiaryPercentage Factor
Under 65 4
65 – 74 5
75 – 79 6
80 – 84 7
85 – 89 9
90 – 94 11

Commencing an income stream

Planning

Here are just some of the things that you will need to understand and consider in order to determine the correct strategy if starting an income stream.

Eligibility

You can access your superannuation balance in the form of an income stream when you meet a condition of release as follows:

  • Member is 65 years of age or more
  • Member has met preservation age (currently age 56) or more and has ceased employment (including self employment) and does not intend to ever take up employment for ten or more hours per week
  • Member is 60 years of age or more and has left employer after his/her 60th birthday
  • Member does not meet one of the above conditions however has attained preservation age (currently age 56 - see table below) and can commence a Transition to Retirement Income Stream

Preservation Age

Date of BirthMinimum Age for accessing super benefits
After June 1964 60
1 July 1963 to 30 June 1964 59
1 July 1962 to 30 June 1963 58
1 July 1961 to 30 June 1962 57
1 July 1960 to 30 June 1961 56
Before 1 July 1960 55

Taxation of the super fund

Once you have commenced a pension the assets used to support the payment of a pension are exempt from taxation.

Personal taxation

Pension payments are tax free once you reach age 60 however if you are age 55 -59 your pension is potentially taxable depending on the taxable and tax-free components of the members benefit.Therefore when establishing an income stream it is important to determine the specific components of your superannuation benefit to establish the potential tax liability related to your income stream.

A members own contributions are deemed non concessional contributions (NCC), for which they have not received a tax deduction, form the tax free component of your benefit.

Contributions that are tax deductable are known as concessional contributions (CC) and form the taxable component of your benefit; this is the component that will be treated as assessable income, if under age 60, however does provide a 15% tax offset.

Your latest member statements from all of your super funds are the only way to determine the components of your existing superannuation.

Copies of any rollover/transfer forms are the only way to establish the validity of your member statements.

How do you want to receive your pension?

Will you draw an income monthly, annually or as you need it?

Investment strategy of the fund

Review the strategy and asset allocation as trustees must pay a minimum pension therefore must have the cash to do so.

Estate planning - always consider your Will however superannuation assets are dealt with separately

What happens to the pension if you die? Is to be paid to:

  • a nominated reversionary beneficiary (e.g. spouse) in the form of a reversionary pension?
  • a dependant (spouse or child under 18) in the form of a pension or lump sum?
  • your personal legal representative (LPR) can only be paid as a lump sum?
  • an adult child / non dependant can only be paid as a lump sum?

Frequently asked questions about pensions 

  • Can I have more than one pension from the same fund? YES
  • Can other fund members also have pensions from the same fund? YES
  • Can I make additional contributions to my fund once I have started a pension? POSSIBLY, GET ADVICE
  • Can I add new money to my existing pension? NO
  • Can I transfer this pension to another fund? YES
  • Do I need to change the asset allocation in my fund once I start a pension? POSSIBLY, GET ADVICE
  • Do I have to take a pension each year? YES
  • Do the assets need to be segregated? NOT NORMALLY, GET ADVICE
  • Can I have an accumulation account and a transition into retirement pension in the same fund? YES