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A pre-retirement pension could help you work less and save more

I'm approaching retirement | | 2 min read


Are you thinking about retiring but not quite ready to give up work?

A pre-retirement pension (also known as a transition to retirement pension or TRP), allows you to draw an income from your super while you’re still working. That means you can cut back on your working hours while maintaining your income. It also offers potential tax benefits.

If you have reached your preservation age and are still working a pre-retirement pension offers flexibility. It can help you structure your working life and income to suit your needs. Here’s how.

Using a pre-retirement pension to reduce work hours

If you want to reduce your work hours as you approach retirement, a pre-retirement pension can be used to top up your income via your super.

Here’s how it might work.

Dan is 62 and wants to reduce his working hours from 5 days to 4. His employer agrees, and Dan goes down to 4 days a week. To help offset his reduced income he draws money from his super. Because Dan has already turned 60 years of age the money he receives from his super is tax free.

This allows him to start drawing down part of his super before he’s retired and enables him to gradually scale back his work hours while maintaining a similar income.

Using a pre-retirement pension to save on tax

You can also use a pre-retirement pension to grow your super and pay less tax in the lead-up to retirement.

Here’s how it might work.

Vanessa is 63 and intends to keep working for another few years. She salary sacrifices part of her income, these amounts are taxed at 15% (which is lower than her regular, marginal tax rate). To make up for the money she salary sacrifices into her super she commences a pre-retirement pension to draw money from her superannuation (which is tax free as she’s already turned 60).

While specific circumstances will vary from person to person, this enables people to grow their super while maintaining their income.

Starting a pre-retirement pension

While a pre-retirement pension has a number of potential benefits, it’s also a complicated financial tool, and we strongly recommend seeking professional financial advice beforehand.

A financial planner can help you calculate the potential cost / benefit analysis of a pre-retirement pension, and how it may impact both your current income and future superannuation balance. There are also specific rules around tax, draw down rates, and age which a planner can assist with.

If you're ready to speak with a financial planner about a pre-retirement pension, simply call to book an appointment on 1300 655 002, or click below for more details.


Any figures quoted are correct at the time of writing but may be subject to change.

Authorised by Togethr Trustees Pty Ltd (ABN 64 006 964 049; AFSL 246383) ('Trustee') the trustee of the Equipsuper Superannuation Fund (ABN 33 813 823 017). Catholic Super is a division of the Equipsuper Superannuation Fund (ABN 33 813 823 017). Financial advice services may be provided to members by the trustee's related entity. 

Togethr Financial Planning Pty Ltd (ABN 84 124 491 078; AFSL 455010). The information contained herein is general information only. It has been prepared without taking into account your personal investment objectives, financial situation, or needs. It is not intended to be, and should not be, construed in any way as investment, legal or financial advice. Please consider your personal position, objectives, and requirements before taking any action. Past performance is not a reliable indicator of future performance.

© 2020 Togethr Trustees Pty Ltd. For further information please our contact our Service Centre on 1300 655 002 or visit our website: csf.com.au.

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