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When can you access your super?

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From 1 July 2015, new superannuation preservation ages will take effect. Those of us born after 1960 will feel the impact so it might be time to consider what this will mean for your retirement plans.

New preservation ages are geared toward encouraging maximum retirement savings. Enabling income from income streams to be tax-free after age 60 ensures superannuation savings are primarily used for funding retirement, rather than paying off the mortgage or otherwise blowing the money.

The intention, of course, is financial independence in retirement.

From this July preservation ages will be as follows:

Date of birth Preservation age
1 July   1960 – 30 June 1961

56

1 July   1961 – 30 June 1962

57

1 July   1962 – 30 June 1963

58

1 July   1963 – 30 June 1964

59

From 1   July 1964

60

The new structure means that if your birth date is anywhere from July 1960 onwards, you will have to wait longer before you can access your super savings – age 60 if you were born after 1 July 1964.

To illustrate simply how preservation and tax affects superannuation, we took a look at two clients with different situations.

Graeme is 56 and still working full time. As he is able to access his super, he came to see us about a transition to retirement strategy (TTR) which would enable him to keep working and contributing to super, while taking pension payments to make up the shortfall in his salary.

In a nutshell, Graeme’s take home pay would be unchanged yet he would be able to increase his superannuation contributions to boost his super savings. Graeme plans to retire at 60, when he will convert the balance of his super to an income stream; the payments will be tax-free.

TTR strategies are gaining popularity for good reason. Talk to your financial adviser to find out if a TTR could work for you too.

Meanwhile, we met Janette, a 54-year-old single lady who wants to retire from work this year. Janette will need to live off her investment savings until she reaches her preservation age of 56. At that stage, Janette plans to take a lump sum to go on a cruise, then take the balance of her super in the form of a pension.

Her tax position looks like this:

After preservation age (56)

 


Taxed at

Lump   sum

$10,000

Marginal   tax rate or 21.5% whichever is lower

Income   stream

Prior   to age 60

Marginal   tax rate

Income   stream

After   age 60

Income   is tax-free

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