How a transition to retirement pension works when you’re 60 and still working

Once you reach preservation age you can start drawing an income from your super without retiring and without cutting back your hours. It’s called a transition to retirement pension, or TTR. You can take between the age-based minimum and a ceiling of 10% of the balance each financial year. What a TTR is not is access to your super as a lump sum.

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How this article was put together. Every rule below is sourced to the ATO or to ASIC’s Moneysmart, named under the section it supports rather than only in a footnote. Where I describe what happens in practice rather than what the rules say, I have labelled it as experience — not a statement of the rules. Figures are current for the 2026–27 financial year as at September 2026.

What is a transition to retirement pension?

A transition to retirement income stream, or TRIS, is a super income stream that lets you reduce your working hours without reducing your income. It tops up a reduced wage with a regular income drawn from your own super savings. Your fund may call it a TTR pension, a transition account or a pre-retirement pension.

Before the transition to retirement rules existed, you could only access super once you were 65 or retired. The rules exist to bridge that gap.

Mechanically it works like any other super pension. Some or all of your accumulation balance moves into a pension account, the money stays invested, and the fund pays you an income at a frequency you nominate. What makes it a TTR rather than an ordinary pension is that you have reached preservation age but have not yet met a condition of release — so two restrictions apply: a ceiling on how much you can draw, and no lump sums.

Sources: Moneysmart (ASIC) — Transition to retirement; ATO — Transition to retirement

What are the rules for a transition to retirement pension?

The rules fall into three groups: who can start one, how much you can draw, and how it is taxed. This section covers the first — the other two follow below.

You need to have reached preservation age, which is 60. The ATO describes 60 as the minimum age at which you can access preserved super benefits without meeting another condition of release.

That is the whole eligibility test. Unlike a full retirement phase pension, a TTR does not require you to meet a condition of release. You do not have to retire, resign or drop your hours. For how conditions of release work when you do want to retire properly, see our guide to how an account based pension works.

One rule people are surprised by: your employer must keep making compulsory Superannuation Guarantee contributions for you while you are on a TTR. Starting one does not affect their obligation.

Sources: ATO — TRIS (preservation age of 60); ATO — Transition to retirement (super guarantee contributions continue)

How much can you draw from a TTR pension?

Between the age-based minimum and a maximum annual payment limit of 10% of the account balance.

The floor is the standard age-based minimum drawdown that applies to every super pension — 4% for anyone under 65. It works the same way here as for an ordinary pension, and we set out the full table and the consequences of missing it in our account based pension guide.

The ceiling is unique to a TTR. Total payments in a year must not exceed 10% of the account balance on the start date of the TRIS, and for later years the calculation is made against the balance at the start of the financial year.

On a $400,000 balance at 1 July, the most you can draw that year is $40,000, and the least is $16,000. Everything in between is your choice.

What happens if you draw more than 10%?

The consequence is severe and worth knowing before you set your payment instruction. Where a fund exceeds the maximum annual payment limit for a TRIS in a financial year, the income stream is treated as having stopped at the start of that year for income tax purposes.

Is the 10% maximum pro-rated in the first year?

No. Where a pension starts partway through a financial year, the minimum is pro-rated but the maximum is not. This asymmetry is not stated in plain terms on the ATO’s consumer pages, so it is worth confirming with your fund before relying on it.

Source: ATO — Transition to retirement income streams (TRIS) (the 10% maximum, the effect of exceeding it, and that the maximum is not reduced when a TRIS starts after 1 July). The minimum drawdown factors are set out in our account based pension guide.

Why you can’t take a lump sum

Under the transition to retirement rules you can only access your super as a non-commutable income stream. A non-commutable income stream is one you can’t convert into a lump sum, which generally means you can’t take your benefits as a lump sum cash payment while you are still working. Your benefits have to come out as regular payments.

One narrow exception: if the pension account contains unrestricted non-preserved benefits — money that was already fully accessible before it went in — you can partially commute the TRIS to take that portion as a lump sum. This does not apply to most people, and it is worth checking with your fund rather than assuming.

Sources: ATO — Transition to retirement (non-commutable income stream); ATO — TRIS (unrestricted non-preserved benefits)

Do you pay tax on a TTR pension?

The income paid to you and the earnings inside the account are treated differently, and conflating them is where most bad TTR advice goes wrong.

The earnings inside the account are taxed. Where a TRIS is not in the retirement phase, the earnings on the assets supporting it are not eligible for exempt current pension income (ECPI) and are taxed at the relevant rate. In practice that is the same 15% that applies in an accumulation account.

The income paid to you is treated the same way as payments from any super income stream at your age. How that lands depends on your age and on whether your benefit contains an untaxed element, so check the ATO’s guidance on tax on super benefits rather than assuming.

The transfer balance cap is not touched. A TRIS does not count toward your transfer balance cap until it goes into the retirement phase.

Sources: ATO — Transition to retirement income streams (states earnings on assets supporting a TRIS are taxed at 15%, are not eligible for ECPI, and do not count toward the transfer balance cap until retirement phase); ATO — Retirement withdrawal: lump sum or income stream (tax on the payments to you).

Is a TTR still worth doing after the 2017 change?

Not on its own. Before 1 July 2017, earnings inside a TTR received the pension earnings tax exemption. That created a real advantage: move money out of accumulation into a TTR and the earnings stopped being taxed, with no other change required. The strategy was recommended widely on that basis.

That treatment ended. Earnings supporting a TRIS that is not in retirement phase are no longer eligible for ECPI. The ATO publishes a guidance note specifically on the 1 July 2017 changes.

So there is no longer a tax benefit in simply starting a TTR pension. Any benefit now has to come from what you do alongside it — which is what the next two sections cover.

Source: ATO — Transition to retirement, which sets out the removal of the earnings exemption from 1 July 2017 and links to the ATO’s Guidance Note GN 2019/1 on the change.

Can a TTR help you cut back your hours?

Yes. This is the use the rules were written for — the ATO frames the whole regime as a way to reduce your working hours without reducing your income.

You are 61. You want to drop from five days a week to three. Your take-home pay falls, and that gap is the reason most people never make the change. A TTR pension lets you top up the shortfall from your own super without formally retiring.

The trade-off is straightforward: you are spending your retirement savings earlier in order to buy time now. Your balance will be smaller when you do stop. Whether that is a good deal depends on what the extra days are worth to you, how long you intend to keep working, and how much headroom your balance has — a version of the question we work through in how much super do I need to retire.

Sources: Moneysmart (ASIC) — Transition to retirement (reducing hours and topping up income); ATO — Transition to retirement (purpose of the rules).

Can you use a TTR while still working full-time?

Yes, and this is the version that needs the most care. The mechanics run in two directions at once:

1. You increase your salary sacrifice into super. Those contributions are taxed as concessional contributions rather than at your marginal rate as salary.
2. Your take-home pay drops as a result, so you replace the shortfall with income from the TTR pension.

Two constraints govern whether that is worth anything:

• Your concessional cap. Everything you sacrifice counts toward the concessional contributions cap, which is $32,500 as at 2026–27 — and your employer’s Superannuation Guarantee contributions come out of that same cap first. On a solid salary, SG alone may already use most of it. We set out how the caps work and how much headroom you actually have separately.
• Division 293. If your income plus concessional contributions exceeds $250,000, an additional 15% applies to concessional contributions above that threshold.

Whether this leaves you better off depends on your marginal rate, your cap headroom, your balance and the cost of running two accounts. It is arithmetic, not a rule of thumb, and it needs to be run on your actual numbers before you restructure anything. Your employer also has to offer salary sacrifice — worth confirming with payroll before you build a plan around it.

Sources: ATO — Key superannuation rates and thresholds (the $32,500 concessional cap and the $250,000 Division 293 threshold for 2026–27).

What do people get wrong about TTR pensions?

This section is professional observation drawn from client work, not a statement of the rules and not sourced to the ATO.

What are the disadvantages of a transition to retirement pension?

The main disadvantages are the 10% drawdown ceiling, the loss of the earnings tax exemption inside the account, the inability to take a lump sum, and the cost of running two accounts. On top of those, a TTR is often the wrong answer when:

• Your marginal tax rate is at the lower end. The narrower the margin over the concessional contributions rate, the more likely fees absorb the benefit.
• Your balance is modest. Ten per cent of a small balance is not much income, and drawing it down in your early sixties has a long time to compound against you.
• Your SG already fills your concessional cap. No room to sacrifice means no strategy.
• You are about to fully retire anyway. Once you meet a condition of release the maximum annual payment limit no longer applies and the earnings exemption begins, so waiting a few months may be better than starting a TTR you will convert almost immediately.
• It would cost you insurance cover. See the checklist below.
• You want access to a lump sum. A TTR does not provide one.

Source: ATO — TRIS (payment limit and commutation restrictions end on meeting a condition of release). The remaining points are judgements about suitability, not statements of the rules.

What happens to a TTR pension at 65?

It moves into the retirement phase. A TRIS is not in the retirement phase until you meet one of these conditions of release:

• You are 65 or older
• Retirement
• Permanent incapacity
• Terminal medical condition
• Death

Three things change at that point. The maximum annual payment limit no longer applies. The commutation restrictions specific to a TRIS end. And the value of the pension at that date is counted toward your transfer balance cap as a transfer balance credit. From that date the fund can start claiming ECPI on the earnings.

Turning 65 does this on its own. The other conditions do not — you have to notify your fund, and the TRIS moves into the retirement phase at the time the fund is notified, not retrospectively. Retiring at 62 and mentioning it eighteen months later means eighteen months of taxed earnings that needn’t have been. Make the call the week you stop.

From that point the account behaves as an ordinary retirement phase pension, with all the rules and choices that go with it — set out in full in our account based pension guide.

Sources: Moneysmart (ASIC) — Transition to retirement (a TTR moves to the retirement phase at 65); ATO — Transition to retirement income streams (the full list of conditions of release, and the notification requirement for the ones other than turning 65).

What should you check before starting a TTR pension?

Five checks, in this order. Each can change the answer on its own. These are practical steps rather than legal requirements.

1. Check the insurance in your existing account

Starting a TTR usually means moving money out of your accumulation account, and in some funds that can affect the life, TPD or income protection cover held there. Premiums generally rise with age, cover in super has age limits (TPD cover usually ends at 65 and life cover at 70), and increasing or replacing cover usually means answering health questions or a medical check — so cover you lose in your sixties can be harder and more expensive to get back. Ask your fund what happens to your cover before anything moves — the same trap we flag in our guide to consolidating your super.

2. Work out what two accounts will cost you

A TTR strategy generally means running a pension account and an accumulation account side by side. On a modest benefit, the extra fees can decide the answer. Your fund’s PDS sets out what each account costs.

3. Calculate your remaining cap headroom

Work out your employer’s Superannuation Guarantee contributions for the year and subtract them from the concessional contributions cap. What’s left is the most you can salary sacrifice.

4. Confirm your employer offers salary sacrifice

Check with payroll before you build a plan around it.

5. Check whether you are about to meet a condition of release

If you are close to retiring, waiting means the maximum payment limit and commutation restrictions never apply to you at all.

Sources: these are practical steps, not legal requirements. the insurance-in-super points — premiums generally rise with age, cover in super has age limits, and increasing or replacing cover usually needs health questions or a medical check — are set out by Moneysmart (ASIC) — Insurance through super and Moneysmart — Life insurance cover; the cap figures are the ATO’s (Key superannuation rates and thresholds); and the condition-of-release point is per ATO — TRIS.

How do you start a transition to retirement pension?

You apply through a super fund, which opens a pension account and asks you to nominate an income amount and frequency within the minimum and maximum. Before you get to that step, three things are worth doing:

1. Pull your latest super statement and find two numbers: your balance, and the insurance cover held inside the account.
2. Work out your SG for the year from a recent payslip and subtract it from the concessional cap. That tells you immediately whether the salary sacrifice route is open to you.
3. Decide what you actually want. Fewer hours, or more into super? They are different problems and a TTR answers them differently.

The ATO itself recommends seeking financial advice when considering super withdrawal options and how tax applies to a transition to retirement income stream. If the answer isn’t clear, that is the point at which modelling earns its keep — and it is the substance of our superannuation and retirement planning advice, from our office in Bundoora and Australia-wide by video.

Source: ATO — Transition to retirement (recommendation to seek financial advice)

Frequently asked questions

General advice warning. This article contains general information only and does not take into account your personal objectives, financial situation or needs. It is not personal financial advice. Before acting on any information, consider its appropriateness to your circumstances, obtain and read the relevant Product Disclosure Statement, and seek personal financial advice. Superannuation and tax rules are current as at the date of publication and may change.