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:

  • 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.

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.

Transition to Retirement Pension and increasing your super

Before Transition to Retirement Pension

After Transition to Retirement Pension

Employer salary

$72,000

$72,000

Less salary sacrifice

-

$42,0002

Employer salary after salary sacrifice

$72,000

$30,000

Plus Transition to Retirement Pension income

-

$29,376

Taxable income

$72,000

$30,000

Less tax (including 2% Medicare Levy)

$15,8573

$2,1974

Net (after-tax) income

$56,143

$57,803

By not changing his working arrangements and salary sacrificing, Jack has contributed $42,000 to his West State Super account, while only reducing his pension account by $29,376.

As a result, Jack has increased his net contribution to super by $12,624 (that’s $42,000 minus $29,376) in the first year, while increasing his net income by $1,660.

The net contribution doesn’t take into account that tax will apply on the salary sacrifice amount when Jack accesses the money.

Find out more about salary sacrifice.

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.

Transition to Retirement Pension and reducing your working hours

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

-

$29,376

Taxable income

$72,000

$36,000

Less tax (including 2% Medicare Levy)

$15,857

$3,4573

Net (after-tax) income

$56,143

$61,919

By reducing his work hours and receiving $29,376 from his Transition to Retirement Pension, Jack has increased his net income by $5,776 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.

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.

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

-

$29,3765

Taxable income

$72,000

$72,000

Less tax (including 2% Medicare Levy)

$15,857

$15,857

Net (after-tax) income

$56,143

$88,519

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 $1.480 million per super fund (for the 2018/19 financial year, indexed annually in line with Average Weekly Ordinary Time Earnings in increments of $5,000 rounded down) are taxed at 15% on entry to a taxed fund. Any amount over the untaxed plan cap will be taxed at 47% before being rolled over.
2 Salary packaged into West State Super. West State Super is an untaxed scheme, which means the salary sacrifice amount isn’t taxed until the benefit is accessed. Concessional contributions to West State Super are not capped, but they count towards your cap when making these contributions to a taxed scheme.
3 Includes the low and middle income tax offset of $530.
4 Includes the low income tax offset of $445 and low and middle income tax offset of $200 (total tax offset: $645).
5 As John is aged 60, his income from an allocated pension is tax free.

Page last updated 02 November 2018