So what is Transition to Retirement?

establishing a TTR strategy

Those approaching retirement have almost certainly heard their friends and colleagues use the term Transition to Retirement (TTR), it is extremely popular (and very effective) strategy that enables Pre-Retirees to significantly boost retirement savings; in many cases without reducing take home pay, but how does it work?

Some years ago the government allowed those over 55 to access part of their Superannuation through a Pension, the logic was to allow workers to ease out of the work force into retirement. This ruling also provided an opportunity for those of preservation age but still working to reduce their tax and increase super contributions.

The reason that the TTR is so effective is that it allows us to replace fully taxable income with income that is taxed concessionally, taking advantage of the advantageous superannuation taxation rates.

The first step in establishing a TTR strategy is rolling Superannuation into a Non-Commutable Allocated Pension (NCAP). An NCAP is able to pay a pension of up to 10% of the total balance of the fund, however unlike a traditional allocated pension, no lump sum withdrawals are allowed. The NCAP has an advantage over superannuation (and all other investments) in the fact that there is no tax on either income or capital gains.

Once the NCAP is established, we elect to commence a pension, the pension amount is calculated based on the individuals circumstances, but must fall between 4%-10%. This is paid directly to the client, between the ages of 55-59 it is taxed concessionally, after age 60 the income is tax free.

By receiving a pension we have increased the take home pay of the client, this is sometimes the desired result (particularly in the event the client is reducing work hours), but the most popular use of the TTR is to have the take home pay remain unchanged.

By salary sacrificing the excess income directly into Superannuation, the take home pay remains the same as it was prior to commencing the strategy, but income tax is significantly reduced. Funds contributed to Superannuation are taxed at 15%, in most cases much lower than marginal tax rates.

The tax savings made in the years prior to retirement through a TTR strategy really add up to significant differences at retirement.  A recent 56 year old client of ours who had approximately $200,000 in Superannuation, earning $80,000 commenced will be approximately $80,000 better off at retirement due to the implementation of a TTR strategy.


If you are past preservation age (currently 56) it is well worth investigating if a TTR is suitable for your situation, it is an excellent way to boost retirement savings without negatively affecting cash flow.  

Author; Alex McKenzie Categories: Future Financial Services Blog

About the Author

Alex McKenzie

Alex McKenzie

Owner at Future Financial Services


  • Paraplanner at Zammit Partners Investments
  • Unit Trust Administrator at Colonial First State


  • University of Western Sydney
  • Penrith High


As a Financial Planner I help people to achieve what they would like in life. This involves helping you to identify the things in life they would like , developing plans to help achieve them and strategies to protect what you already have. We do this by providing Financial Advice to guide you through your life stages.

The financial planning process involves determining a clients current situation and financial objectives and tailoring strategies to assist in best achieving those objectives.

I am an expert in superannuation, investments and insurance, these are tools we use to help you achieve your goals.

I aim to use my knowledge of superannuation, taxation and Centrelink to efficiently use your assets and income to achieve your financial goals.

Retirement and pre-retirement planning, wealth creation, asset protection, insurance planning and estate planning are all areas of advice that I provide.

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