Here we answer the most frequently asked questions about super contributions, transition to retirement changes and limits on retirement products.
What are before-tax (concessional) contributions?
Before-tax (concessional) contributions include contributions that your employer makes into your super account on your behalf, salary sacrifice contributions (that is contributions you direct your employer to make on your behalf from your pre-tax salary) and personal contributions for which you claim a tax deduction.
What are after-tax (non-concessional) contributions?
After-tax (non-concessional) contributions include contributions that you make into your super account from your take home pay, available cash savings, or with other available capital.
What is a transition to retirement pension?
A transition to retirement (TTR) pension is a product offer that you commence with super savings when you reach your 'preservation age' but haven’t yet fully retired. These pensions can assist you in providing additional cash flow to supplement your employment income if you choose to reduce your working hours but don’t want to compromise your current lifestyle.
If you have a transition to retirement pension, the minimum drawdown rate is 4% and you’ll be limited to income payments of no more than 10% of your account balance per year. You won’t be eligible to withdraw lump sums until you have met a full condition of release.
Your preservation age is 55 if you were born before1 July 1960, and increases depending on the year that you were born. See the Australian Tax Office website for more information
How does a retirement product work?
A retirement product provides an income stream to support your lifestyle in retirement. You have to receive a minimum amount from your retirement product each year. The amount you need to receive is based on your age, and your retirement product balance. The minimum drawdown rates range from 4% if you’re under age 65 up to 14% if you are over 95. Once you have retired or met certain other criteria, you are also able to withdraw lump sums if you require additional capital.
Your income payments can generally be made fortnightly, monthly, quarterly or yearly depending on your needs. How long your retirement product lasts will depend on how much you withdraw each year, the investment returns you receive and the amount of fees you pay.