Transition to retirement
Preservation of benefits in TTR income streams
A TTR income stream can be commenced with either preserved benefits only, or a mixture of:
- preserved benefits
- restricted non-preserved benefits
- unrestricted non-preserved benefits.
It is also important to note that under the super rules, superannuation funds may subject benefits to higher preservation requirements than the minimum required. In the case of TTR pensions, this may involve a fund considering all benefits within a TTR pension to be preserved benefits. It is therefore important to confirm whether a member's fund will maintain existing preservation components or treat all benefits as preserved upon the commencement of their TTR pension.
When dealing with a fund that fully preserves benefits upon commencement of a TTR pension, consideration should be given to commencing an account based pension with all unrestricted non-preserved benefits and a TTR pension using preserved funds. This could allow the member to keep their unrestricted non-preserved funds in case of emergency.
Priority order when cashing preservation components
Where a superannuation benefit is cashed and the member has only met a condition of release with cashing restrictions (eg the 'attaining preservation age' condition of release), the cashing must come from preservation components in the following order:
- unrestricted non-preserved
- restricted non-preserved
It is important to note that cashing of benefits refers to the payment of benefits out of the superannuation system and not the rollover of benefits within the super system or the commencement of an income stream. Where a member has a mixture of preservation components within their super balance, and uses part of their balance to commence a TTR pension:
- The commencement of the TTR pension does not have to comply with the priority of preservation components rules (eg the member could choose to use 50% of their preserved and 50% of their unrestricted non-preserved benefits to commence the TTR pension, subject to their fund allowing this).
- Any payments other than rollovers made from the TTR pension, including income stream payments and commutations, are subject to the priority of preservation components rules.
Preservation once full condition of release is satisfied
All of a member's benefits in a TTR income stream become unrestricted non-preserved once they have satisfied a full condition of release, for example permanently retiring after reaching preservation age, ceasing gainful employment after reaching age 60 or reaching age 65.
Last modified: Wednesday, July 24, 2019