When can I access my super? – Explaining transition to retirement strategies
Joshua van Gestel, Sunsuper's National Education Manager, returns from delivering member seminars on the road to answer a burning member question: "When can I access my super?" He talks with Head of Advice and Retirement Anne Fuchs about the five conditions of release, including reaching preservation age, and explores the circumstances in which members might take advantage of a Transition to Retirement (TTR) Income account and recontribution strategies.
Intro: Welcome to the New School of Super. A fresh look at money matters, your super and the things that could affect your financial dreams now and in future with Sunsuper's Chief Economist Brian Parker and Head of Advice and Retirement Anne Fuchs.
Anne Fuchs: Hello and thanks for listening. Welcome to the New school of Super - Sunsuper's podcast series covering investment markets, money matters, your superannuation and most importantly, making sure you live your retirement dreams. Well, I have a very old, dear friend-
Joshua van Gestel: Old?
Anne Fuchs: Well, you're not really old. When I say 'old', old in the sense that you've been a longstanding contributor to the School of Super. Joshua van Gestel, our national education manager here at Sunsuper, who's got quite an audience these days - you had 1500 members watching around the country!
Joshua van Gestel: That's right, we've just finished doing our annual retirement seminar series. That was a wonderful, wonderful opportunity to made our members and talk to them. And that was great fun actually.
Anne Fuchs: Well, I'm looking forward to- actually, that's what we're gonna be talking about today; some of the insights and learnings and getting that out to all of our members who weren't able to make the seminar. But before we do that, I'll just introduce myself. So my name is Anne Fuchs and I head up advice and retirement at Sunsuper, and the team and I come to work every day. We work with our members. We understand what's important to them, what their retirement dreams look like. And then we turn that into a financial plan that they can achieve and adhere to. And it's a really- it's a privilege to work with our members, and we really have the best of fun too. Now, Joshua.
Joshua van Gestel: Yes, Anne.
Anne Fuchs: You're in the hot seat.
Joshua van Gestel: So you want me to do some disclosure.
Anne Fuchs: I do, yeah well we need to do it.
Joshua van Gestel: Well can I start by saying for full disclosure, when Anne calls me old, we're actually the same age.
Anne Fuchs: We are. In our fabulous mid forties.
Joshua van Gestel: But if I can, before we get started, especially today, we're going talk about a few strategies and a few things to consider. It is really important that our listeners remember that it is general advice that we're providing and discussing today, that they should really consider what we talked about for their own circumstances and if they do want to act on anything that we discuss they really need to seek out some personal advice. They can also get a copy of their product disclosure statement from our website or by calling us on 13 11 84.
Anne Fuchs: That's beautiful. Now, before we begin, I think I just also- I'll throw a compliment your way and Brian's too, which I don't like doing and I'm deliberately doing it while he's not in the room because it would go to his head. But I think Sunsuper is so lucky to have you, you know, you and Brian. Brian - bringing economics to life, jazz hands and all metaphorically speaking, and then you in terms of your deep technical knowledge and bringing it to life for our members and getting around the country the way that you do. I sometimes am exhausted listening to your travel schedule, but you really do make it so engaging for our members.
Joshua van Gestel: Anne and to be honest, a point you made earlier, I think I am very privileged in the job I do, as I think many of us are. I get to make our wonderful members and talk to them.
Anne Fuchs: Josh I understand one of the main questions that you get asked when you are out visiting our members all around the country is how and when can I access my super. So for our listeners, are you able to inform them?
Joshua van Gestel: Absolutely, Anne. And yes it is the main question we get asked. And there are 5 times you can really access your super as you approach and move into retirement. And the first is that you reach preservation age. Now most of our listeners are probably going 'What is preservation age?? Something else for super to throw at us?'. Preservation age is actually when you can first get your super, and it's based on your date of birth. In short, if you're born after the first of July 1964 your preservation age is going to be 60. If you're born before that, it's probably going to be either 57, 58 or 59.
Anne Fuchs: Okay, so that's the first time you can access you super.
Joshua van Gestel: The first. Number two is that you've reached preservation age and you've permanently retired. Now, where the difference is between the first and the second is if you reach preservation age and you're still working, you can only access your super as an income - we'll come back to talk about that. If you are permanently retired, you can now also take lump sums from your super.
Anne Fuchs: Okay, Number three.
Joshua van Gestel: Number three is that you reach age 60 or over and you actually have a change in employment. Now, this doesn't mean that you have gone from full time to part time with your employer. It doesn't mean that you've had a change in role. It actually means that you leave one employer and go to another.
Anne Fuchs: Okay? All right, that's an interesting one. So now, number four.
Joshua van Gestel: Number four. Congratulations. You've had your 65th birthday. Your super is yours.
Anne Fuchs: Beautiful. And number five?
Joshua van Gestel: Number five is the ultimate condition of release.
Anne Fuchs: Awww. Bye bye. Sayonara. Auf wiedersehen.
Joshua van Gestel: That is correct. So let's maybe focus on the first four.
Anne Fuchs: Yeah, they're happier circumstances. All right, yes. Let's do that.
Joshua van Gestel: So when it comes to preservation age, there's this wonderful thing a lot of our members either don't know about or perhaps have forgotten about, called a transition to retirement income stream. And when you reach preservation age, if you're still working, you might actually be starting to think about winding back your hours. You might have worked hard all your life and your body is starting to find things a bit hard. The transition to retirement income stream means that while you still working, you can start to access your super as income.
Anne Fuchs: And there's also some taxation benefits to this one too isn't there Josh?
Joshua van Gestel: There is. So the income that you receive if you're under the age of 60 from a TTR is gonna be taxed as your normal income. But you actually get a 15% tax offset. And if you're over the age of 60, you can actually start receiving your income from your super, tax-free.
Anne Fuchs: When should our members, if they think this is something that might be of interest to them, whether they are looking at their tax or would like to wind back their hours and take some income, what should our members do and be thinking about too?
Joshua van Gestel: Absolutely. They should give us a call and talk to us about it, because this isn't going to be appropriate for everyone. It may not be a huge tax difference for everyone. The other thing to consider is when you start accessing your super, especially if you're doing it at preservation age, it might be some years until you receive the age pension. And this is money that if you if you take it now, you don't have it for later on.
Anne Fuchs: So what you're suggesting there is, is that the size of your balance is really important.
Joshua van Gestel: Absolutely.
Anne Fuchs: So probably if anything- anything less than 60,000 this definitely could be a no-go area for you, because of the impact it might have on the longevity of your retirement savings?
Joshua van Gestel: That's absolutely correct. But I think there are a couple of other things to think about. That a transition to retirement income stream, it's not a huge shifting in concept. We take part of your balance or however much you tell us, put it into a transition to retirement account. You can invest it the same way as you do. You get access to the same benefits as a member. Nothing really changes, other than instead of you just putting contributions in - which you can still do - we actually just start to pay you an income as well.
Anne Fuchs: Look, in this strategy - although Josh has this beautiful way of making complex things sounds simple - this is actually something that has complexity attached to it. Why financial advice is so important. And certainly there are tens of thousands of our members that have a financial advisor of their own that they've chosen that they work with. And if this is something that sounds of interest to you and you have an advisor, you should speak to your personal financial advisor. And if you don't have a financial advisor, calling us is the best place to start to speak to one of our advisors in the member advice centre who can provide very simple financial advice around these types of things in your Sunsuper account.
Joshua van Gestel: Completely agree. I think, this year I've probably spoken to about, I don't know, 5000 lucky members? Every single one of them, every single one of them, has a unique story in the unique situation. So it is really important as you say, that they speak to us or their adviser.
Anne Fuchs: And so if we look at the concept of and accessing super, and I think that transition to retirement is the main theme we wanted to get to our members or message we wanted to get out to our listeners today there. But I suppose another question that comes up often is around our members. And if their partner is a different age, much younger, or they have a much lower balance than the other spouse, what you could do about that to even that out a bit?
Joshua van Gestel: So it's important to think about these four conditions of release that we spoke on. They give you access to your super to help you spend that money or spend that income. But think about if you don't need that money, if you don't need that income, there's still a really important opportunity or potential. You can withdraw that money and actually do what we call re-contribute it. So you can put that into, for example, as you mentioned, we do have in Australia couples where typically the male will have a much, much higher account balance than a female spouse. And they might actually want to consider re-contributing money that they withdraw from their own accounts into their spouse's account and therefore trying to equalise those balances. There could be really good reason for doing it, especially if you've got large balances - it gives you a bit of protection from legislative change. But I think also and this is something I'm very conscious off with my own wife, that Tash and I have this combined pool of savings, but most of it sits in my account. So it's very important to me to actually think about how we move part of that to Tash's account to equalise things.
I think the other thing to think about though there is opportunity; if you may be close to getting the age pension - and I mean close in terms of the means test - that if you've got a younger spouse who is not yet age pension age their superannuation account balance is actually not counted for aged pension mains testing. So if you get access to your account, you withdraw it. You re-contribute that to your younger spouse's account. What you're in effect doing is taking an asset that would otherwise be counted for the aged pension means tests, and moving that around. Moving it away, so it's not going to be counted.
The third and final thing, is that if it is your intention or your hope, that you'll have some account balance left in your super when you pass away, and that you'd like that to go to adult children, those children could very likely pay tax and that tax may be substantial. So you can use re-contribution strategies by withdrawing money from your own account, and contributing it back in as an after tax contribution or putting it into a spouse's account as an after tax contribution. What you're effectively doing is changing the tax status of your benefit. And that means that any benefit paid to children from that after tax contribution will actually now be tax-free.
All of these are really complex, all of them need thought and discussion. And again, as I said, every members situation is different. So if any of these ring true for you, if any of the points we've made trigger your thinking, it's really important again to your earlier point that you give us a call 13 11 84, or speak to your own advisor if you have one, and actually see whether they're appropriate or whether they can make a difference for you.
Anne Fuchs: And because, certainly with these strategies that are complex in nature in terms of dealing with cash flow and tax components, there's also the other factor to ensuring your money lasts as long as you last. And that's obviously how that money is invested. And Brian and I have spoken a lot about the importance of asset allocation and your risk appetite, because that's another part of the puzzle of getting the perfect financial plan. It's not just the tax, not just the income that you need to live on and your cash flow, but also how that money is invested.
Joshua van Gestel: And I think especially in uncertain times as you're talking about, that retirement stage of life I think it's important that you do think about all of those things.
Anne Fuchs: Well, any well did you have any favourite cities that you visited before we finish up Josh?
Joshua van Gestel: Well, Maroochydore is fond to my heart. I'm a Sydney boy, but holiday in Maroochydore every year, and I do love the Maroochydore audience. They laugh it all my jokes.
Anne Fuchs: Well, a big shout out to our Maroochydore / Sunshine Coast listeners. It's certainly my favourite place to holiday as well. But I'm a Noosa girl myself. Sunshine Beach to be precise. But anyway.
Joshua van Gestel: Thank you for having me along.
Anne Fuchs: Josh it's always a pleasure, and thank you to all of our listeners and to our members for your ongoing interest in your retirement savings. This is your money. You've worked hard for it. It's so important you pay attention and pay notice to what it's doing, how it's invested, because it's the second biggest asset you'll most likely own. Thanks for listening, and we look forward to you joining us again soon.
Outro: This has been the New School of Super. For information and inspiration to help you plan your future, manager Super, and enjoy your retirement, visit sunsuper.com.au/thedreamproject. Or if you've got a superannuation or investment question, you'd like Brian and Anne to discuss, then get in touch at newschoolofsuper.com for it feature in one of our future New School of Super podcasts.
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