Transition to retirement with West State Super

With a transition to retirement strategy, you can access your super as regular income while you’re still working.

Once you’ve reached your Commonwealth preservation age, you can use your super to start a regular pension, such as our Transition to Retirement Pension. This type of pension is known as a ‘non-commutable income stream’ because it doesn’t allow lump-sum withdrawals while you’re working.

There are a number of ways you can use transition to retirement to benefit you. You might:

• Increase your super - you'll continue to work and can sacrifice some of your salary to super
• Reduce your hours - you can work less without reducing your overall income, as your pension can make up for your lower salary
• Increase your income - you'll be receiving an income stream from a pension as well as your normal salary

You can find the right balance to suit your needs, with the flexibility to change your strategy. We recommend that you speak with a financial adviser, accountant or tax adviser to help you decide if transition to retirement is right for you.

Read the case study below to find out how transition to retirement works with West State Super.

Meet Jack, age 60

• Jack has an annual salary of $72,000 and a West State Super benefit of $346,600
• He decides to transfer all but $1,000 of his super benefit to our Transition to Retirement Pension
• The taxable component - untaxed element of his benefit will be taxed at 15%¹ upon transfer because West State Super is an untaxed scheme
• If all of Jack’s benefit is untaxed, he will have a pension account balance of $293,760 after the 15% tax has been deducted
• As Jack is 60, the income he receives from his pension is tax free

Here are some examples of how Jack could use transition to retirement.

Please note: All examples and scenarios used on this page are for illustrative purposes only. The figures in the calculations are for the 2023/24 financial year.

Option 1. Jack could increase his super

If Jack doesn’t need the extra income, he could take advantage of tax benefits to increase his super in preparation for retirement.

Jack chooses the maximum annual income of 10% of his pension account balance, and receives $29,376 in the first year. He continues to work full time, while sacrificing part of his salary to super.

Option 2. Jack could reduce his working hours

Jack decides to work part-time and receive the maximum annual income payment (10% of his pension account balance). For the first year, Jack will receive $29,376.

By reducing his work hours and receiving $29,376 from his Transition to Retirement Pension, Jack has increased his net income by $5,281 in the first year.

However, his pension account has decreased by 10% from the income payments. In this example, Jack hasn’t increased his super by salary sacrificing. However, he can still choose to have his employer’s SG contributions paid to his West State Super account, which will start building his super again. The amount of these contributions will be less due to his lower salary.

Option 3. Jack could increase his income

Jack continues to work full-time. He chooses the maximum annual income payment (10% from his pension account balance). In the first year, Jack will receive $29,376 from his pension.

By not changing his working arrangements, Jack has increased his net income by $29,376 in the first year.

Although Jack’s pension account has been reduced by 10%, any contributions made to his West State Super account will start building his super again.

1 Amounts up to the untaxed plan cap of $1.705 million per super fund (for the 2023/24 financial year, indexed annually) are taxed at 15% on entry to a taxed fund. Any amount exceeding the untaxed plan cap will be taxed at 47% (including the 2% Medicare Levy) before rolling over.
2 Salary packaged into West State Super. West State Super is an untaxed scheme, which means the salary sacrifice amount is not taxed until the benefit is accessed. There is also no annual limit on concessional contributions to West State Super.
3 As John is aged 60, his income from an allocated pension is tax-free.
4 Includes the low income tax offset of $700.
5 Calculated as taxable income less tax ($30,000 - $2,142 = $27,858), plus Transition to Retirement Pension income ($29,376).
6 Calculated as taxable net income less tax ($36,000 - $3,402 = $32,598), plus Transition to Retirement Pension income ($29,376).
7 Calculated as taxable income less tax (i.e. $72,000 - $15,307 = $56,693), plus Transition to Retirement Pension income ($29,376).