INVESTING

Should I start a TTR pension?

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Q: Should I start a TTR pension in case they're scrapped?

A: Regardless of speculation over legislative changes, if you are over age 60 and still working, you should still commence a transition to retirement pension even if you do not require the minimum pension to assist with living expenses.

A common strategy is to salary sacrifice up to the maximum concessional contribution level, which will provide a tax benefit of the difference between your marginal tax rate and the super tax rate of 15%. You then draw a pension from your TTR pension to assist with the reduction in your salary so that your household cash flow is not reduced.

TTR

The additional benefit of this strategy is that your super tax rate reduces from 15% to nil once in the pension account. This can be a substantial tax saving if your super balance is, say, $500,000, and the taxable earnings are 5%. In all, this would save tax of $3750 in that year.

If you are under age 60, there may still be some benefit in adopting this strategy but it will depend on a number of factors, including your current super balance, your personal taxable income and how much of your super balance is "tax free". Otherwise, any pension started before 60 is classed as taxable income but it has a 15% rebate attached.

Jonathan Philpot, partner, Wealth Management, HLB Mann Judd

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Jonathan Philpot is partner, wealth management, with HLB Mann Judd.
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