Transition to Retirement

Transition to Retirement is still a great strategy to boost retirement savings

Over the last decade the Transition to Retirement (TTR) income swap strategy has become a very popular strategy for pre-retirees. Last year’s budget introduced some much-publicised changes to the Super system and two of those changes negatively impacted the TTR strategy. There has been some press suggesting that this may make this financial planning staple somewhat redundant. This is not the case.

So, what is the TTR income swap strategy? Essentially, it involves accessing a portion of your super through the use of a pension. The income from the pension is tax free providing you are over age 60. This additional income creates a cash flow surplus. You are then able to salary sacrifice this surplus back into super which reduces your taxable income, increases super contributions and will result in the same net income.

A further benefit of this strategy was that earnings in pension phase were tax free as opposed to being taxed at 15% in super for income and 10% for capital gains.

As of July 1, the second benefit of the strategy will no longer exist, earnings in these TTR pensions will be taxed at superannuation rates.

The reduction of the concessional contribution cap to $25,000 has reduced the amount that pre-retirees are able to contribute to superannuation; it is currently $35,000 for people over 50. The income swap strategy has allowed many pre-retirees to contribute close to the $35,000 cap, and the reduction to a $25,000 limit will reduce the benefit that they are currently able to achieve.

However, without the use of a TTR pension, most people are not contributing $25,000 a year to super.  The Transition to Retirement pension at least allows you to maximise your deductible contributions.

It should also be remembered that the cap is $25,000 each, so couples should look at their joint cash flow and where possible maximise both caps. This is sometimes forgotten when one partner is not old enough to access super.  In this circumstance, there will be many clients who, by accessing their super, will be in a position to maximise their contributions and increase cash flow sufficiently that their partner is also able to salary sacrifice and reduce their taxation too.

The new changes have reduced the effectiveness of the income swap strategy however, it remains a very effective method to build superannuation savings.


If you currently have a TTR strategy in place, we recommend seeking advice to ensure that your strategy is still effective with the new legislation. 

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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