What happens to my TTR when I turn 65?

In this guide

When a TRIS recipient turns 65
SMSF trust deed and pension-specific rules
Entering retirement phase
Transfer balance cap vs total super balance

Transition-to-retirement (TTR or TRIS) pensions allow super fund members to access their retirement savings as soon as they reach their preservation age, regardless of their work status.

These pensions have become even more popular since the preservation age and the age at which pension payments become tax free have aligned at age 60 (although fund earnings on the assets supporting a TRIS are still taxed).

If you have started a TRIS or are contemplating doing so, there are some important issues you need to be aware of, as well as actions you may need to take as you approach age 65.

When a TRIS recipient turns 65

A number of changes come into effect when a TRIS recipient turns 65, most of which are beneficial for the member:

The 10% maximum pension limit for a TRIS will no longer apply, allowing full access to your pension benefits
The lump sum restrictions that usually apply to these ‘non-commutable pensions’ are removed, giving members more flexibility in the way they access their super
The TRIS automatically enters retirement phase and becomes a ‘retirement phase pension’. This means that:
- All super fund income and capital gains relating to the assets that support the TRIS are exempt from tax from this date
- The value of the member’s TRIS is now counted towards their transfer balance cap.

It is this last point around automatically entering retirement phase that TRIS recipients need to be aware of, as it may require careful consideration and planning.

Important

For most TRIS recipients, there is no ceasing of the existing pension and start of a new pension. It is the same pension that continues albeit this is now a ‘retirement phase’ TRIS.

However, SMSF members will need to carefully review their pension documentation and the fund’s trust deed to see if there are any limitations or restrictions around making changes to an existing pension.

SMSF trust deed and pension-specific rules

SMSF members accessing benefits by way of a TRIS need to have a good understanding of the specific wording contained in both the pension paperwork and their SMSF trust deed.

In some cases, the pension agreement and/or the fund’s trust deed may contain fund-specific or pension-specific wording or rules that need to be adhered to.

It is important that all these rules are followed, especially where there are restrictions imposed on making any change to an existing pension.

The ATO make the following statement regarding SMSFs:

“The regulatory restrictions particular to a TRIS (the 10% maximum annual payment and commutation restrictions) fall away automatically once the member meets one of the conditions of release listed above, subject to the governing rules of the fund and/or the agreement or standards under which the TRIS is provided. Once those limitations are gone, the TRIS has the same restrictions and requirements as an account-based superannuation income stream.”

Where SMSF trust deed or pension-specific restrictions apply, you may need to formally stop the existing pension and then start a new one.

Entering retirement phase

A TRIS will automatically enter retirement phase when the recipient turns 65; the pension value on this day is used to determine the transfer balance cap outcomes.

It is for this reason that some TRIS recipients need to plan well ahead for this event so as not to create an excess transfer balance cap issue.

Example

Stuart commenced a TRIS in 2020 when he was aged 60. He started his TRIS with $2.4 million of his super balance.

As his TRIS is not a retirement phase pension, it did not count towards Stuart’s transfer balance cap when it started, so the TRIS commencement value was not limited to the $1.6 million transfer balance cap at that time.

Stuart turns 65 next week and the current balance of his TRIS is $2.2 million.

If Stuart does nothing, his entire TRIS will enter retirement phase automatically and the balance of $2.2 million will then be assessed against his transfer balance cap, currently $1.9 million.

Stuart will therefore have exceeded his transfer balance cap and have an excess transfer balance account of $300,000.

The outcomes from this are:

Stuart will need to withdraw (commute) the excess amount from his pension
Excess transfer balance cap tax will be levied by the ATO and Stuart will need to pay tax on the earnings relevant to his excess transfer cap for each day his account is in excess.

Learn more about how the transfer balance cap for super pensions works.

Transfer balance cap vs total super balance

Even though the balance of a TRIS only counts towards your transfer balance cap when that pension is in retirement phase, the actual pension balance will always be included in the calculation of your total super balance, whether the pension is in retirement phase or not.

You need to keep this in mind, as your total super balance can affect your eligibility to access super concessions and even your eligibility for non-concessional contributions.

Learn more about the difference between your total super balance and your transfer balance cap.