Transition to Retirement (TTR) Explained

A transition to retirement (TTR) pension is an income stream your own super pays you while you're still working, available from age 60. Normally super stays locked until you fully retire — TTR is the official exception, a tap on the side of the tank with a flow restrictor attached.

It powers two very different strategies: winding down without a pay cut, or working full-tilt while turbocharging your super. Here's how both work, and why one of them lost some shine in 2017.

From age 60 — preservation age, the age the government finally unlocks super — you move a chunk of your super into a TTR pension account. That account must pay you between 4% and 10% of its balance each year. No lump sums, just the regular flow.

Because you're 60, every one of those pension payments is tax-free and doesn't appear on your tax return.

You keep a normal accumulation account open too, because your employer's 12% super contributions still need somewhere to land. Two accounts: one filling, one dripping.

Say you're 60, earning $90,000, and you drop to four days: your salary falls to $72,000. A TTR pension paying roughly $18,000 a year — tax-free — plugs the gap almost exactly.

Actually, better than exactly: your taxable salary dropped, so you pay less income tax, while the replacement income is taxed at zero. Your take-home can land close to your old five-day figure on four days of work.

The cost is honest: you're spending retirement savings early, so the balance you eventually retire on will be smaller. You're buying back your Fridays with future money.

The sneakier play keeps you full-time. You salary sacrifice hard — sending a big slice of salary into super at 15% tax instead of your marginal rate (the tax rate on the last dollar you earn) — and replace the missing take-home pay with tax-free TTR pension payments.

Salary that would have been taxed at, say, 32% including the Medicare levy now enters super at 15%, while the income you live on comes out of the pension at 0%. Same lifestyle, materially less total tax, and the savings land in your super.

The guardrail is the concessional cap — $30,000 a year of before-tax contributions for FY2025-26, with your employer's 12% counting towards it.

Until 2017, money moved into a TTR pension had its investment earnings taxed at 0%, like a real retirement pension — so people with no interest in slowing down opened TTRs purely to switch off earnings tax. Since 1 July 2017, TTR earnings are taxed at 15%, the same as regular super, and that reason is gone.

But both real strategies — buying back your time, or the sacrifice-and-replace shuffle — still work, because pension payments after 60 remain tax-free. And the moment you fully retire or turn 65, the account converts to a genuine retirement pension and earnings tax drops to zero anyway.

Wind-down TTR suits people 60-plus who want fewer hours more than a maximum balance — and who've checked the smaller final number still funds the retirement they want.

Boost TTR suits strong earners at 60-plus with cap room to spare, happy to keep working while arbitraging 32-47% tax down to 15%.

With caps, drawdown rates, and fund paperwork in play, this is a rare case where professional advice usually earns its fee. Start by modelling the salary sacrifice side in our calculator to see the size of the prize.