If you’re over 55 and still working, opening a Russell Private Active Pension to take advantage of a Transition to Retirement strategy might be just the thing to give your retirement savings a boost.
The more you save now, the more you’ll have at retirement and that’s where a Transition to Retirement (TtR) strategy comes in.
Access your pension while you work
Although designed as a way to help people cut back to part-time work before retirement, anyone over 55 with superannuation can start a TtR pension. This applies even if you are still working full time, and gives you the opportunity to take advantage of some very attractive tax benefits:
- Investment earnings in a pension account are not subject to tax versus leaving superannuation in a contribution account where it is taxed at up to 15%.
- Income payments from a pension account are tax free for people over 60. Under age 60, part of the pension may be taxable, but a 15% tax offset substantially reduces the amount of tax payable.
- Using a salary sacrifice strategy will divert some pre-tax income to superannuation. Instead of paying up to 46.5% tax on your income, it will only be taxed at 15% when contributed to superannuation.
Making it easy
The Russell Private Active Pension is specifically designed for people using a TtR strategy. It combines both a contribution account and a pension account within the one product. Add on an ANZ banking facility which gives members aged over 60 at-call access to their pension funds and the Russell Private Active Pension is the ideal all-in-one solution for superannuation, pension and banking.
Jim provides a good example
He is 60, works full time, and earns $100,000 a year.
His income tax payment of $27,500 leaves him with $72,500 to meet his living expenses. Jim decides to salary sacrifice $50,000 a year to superannuation, dropping his taxable income to $50,000. He now only pays $9,750 in income tax.
To make up the shortfall in income, Jim starts a TtR pension, and he only needs to receive $32,250 from the pension to maintain his current lifestyle. As he is over 60 his pension will be tax free. His contribution to superannuation will be taxed at 15%, but that still leaves $42,500 in his account. In other words, Jim is adding $10,250 more a year to his superannuation account than he was before he implemented the strategy, but still taking home the same income.
