Transition to retirement with GESB 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:

  • 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 GESB Super.

Meet John, age 60

  • John has an annual salary of $72,000 and a GESB Super benefit of $346,600
  • He decides to transfer all but $1,000 of his super benefit to our Transition to Retirement Pension. No tax applies on the transfer because GESB Super is a taxed scheme
  • As John is 60, the income he receives from his pension is tax free

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

1. John could increase his super

John decides to transfer all but $1,000 of his GESB Super benefit into a Transition to Retirement Pension ($345,600) and selects an annual income payment of 5%. John also arranges with his employer to salary sacrifice contributions, so that his employer's SG contributions and his salary sacrifice contributions, equal his concessional contributions cap.  Selecting a pension payment of 5% ensures John takes home a net income which is at least as high as his previous net income, while salary sacrificing up to his concessional contributions cap maximises his retirement benefit. As John is aged 60, the income stream he receives from his Transition to Retirement Pension is tax free.

Transition to Retirement Pension and increase your super
 

Before Transition to Retirement Pension

After Transition to Retirement Pension

Employer salary

$72,000

$72,000

Less salary sacrifice

-

$18,1601

Employer salary after salary sacrifice

$72,000

$53,840

Plus Transition to Retirement Pension income

-

$17,280

Taxable income

$72,000

$53,840

Less tax (including 2% Medicare Levy)

$15,8572

$9,3993

Net (after-tax) income

$56,143

$61,721

As John is 60, his concessional (before-tax) contributions cap for 2018/19 is $25,0004.
John’s concessional contributions include his employer’s 9.5% Superannuation Guarantee (SG) of $6,840. This means he can salary sacrifice up to $18,160. If John goes over his cap, then he might have to pay more tax.

By not changing his working arrangements and salary sacrificing, he has contributed $18,160 to his GESB Super account, while only reducing his pension account by $17,280.

Please note there is a contributions tax for very high income earners.

Find out more about salary sacrifice.

2. John could reduce his working hours

John decides to work part time and receive the maximum annual income payment (10% of his pension account balance). For the first year John will receive $34,560.

Transition to Retirement Pension and reducing your hours of work

Before Transition to Retirement Pension

After Transition to Retirement Pension

Employer salary

$72,000

$36,000

Less salary sacrifice

-

-

Employer salary after salary sacrifice

$72,000

$36,000

Plus Transition to Retirement Pension income

-

$34,560

Taxable income

$72,000

$36,000

Less tax (including 2% Medicare Levy)

$16,387

$3,6575

Net (after-tax) income

$56,143

$67,103

By halving his work hours and receiving $34,560 from his pension, John has increased his net income by $10,960 in the first year.

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

3. John could increase his income

John continues to work full time. He chooses the maximum annual income payment (10% of his pension account balance). In the first year, John will receive $34,560 from his pension.

Transition to Retirement Pension and increasing your income

Before Transition to Retirement Pension

After Transition to Retirement Pension

Employer salary

$72,000

$72,000

Less salary sacrifice

-

-

Employer salary after salary sacrifice

$72,000

$72,000

Plus Transition to Retirement Pension income

-

$34,560

Taxable income

$72,000

$72,000

Less tax (including 2% Medicare Levy)

$15,8572

$15,8572

Net (after-tax) income

$56,143

$90,703

By not changing his working arrangements, John has increased his net income by $34,560 in the first year. Although John’s pension account has been reduced by 10%, any contributions to his GESB Super account will start building his super again.

1 Salary packaged into GESB Super. GESB Super is a taxed scheme and concessional contributions are generally taxed at 15%.
2 Includes the low and middle income tax offset of $530.
3 Includes low income tax offset of $192 and low and middle income tax offset of $530 (total tax offset: $722).
4 The general concessional contributions cap is $25,000 for the 2018/19 financial year, indexed annually in line with Average Weekly Ordinary Time Earnings in increments of $2,500 rounded down. 
5 As John is aged 60, his income from an allocated pension is tax free.

Page last updated 02 November 2018