Transition to Retirement Minimum and Maximum Withdrawal for Pensions

What are the transition to retirement pension minimum and maximum withdrawal amounts and how on Earth are they applied?

Fear no more, SuperGuy is here to save the day. I’ll explain exactly how to calculate the minimum and maximum withdrawal amounts for both full and partial years.

Transition to Retirement Pension Minimum and Maximum Withdrawal

When you start a transition to retirement pension, you are required to receive an income of between a minimum and maximum amount in each financial year that the transition to retirement pension is in existence, including partial years.

The minimum and maximum withdrawal thresholds are calculated as 4% and 10% of your transition to retirement (TTR) pension balance each financial year. That is, you must receive an income of between these amounts.

The 4% and 10% is calculated on your TTR pension balance on 1 July of each year and applies for the duration of that financial year. Then, the minimum and maximum withdrawal amounts are recalculated again on 1 July of the following financial year and apply to that year, and so on.

If you start a TTR pension part-way through a financial year, the 4% and 10% calculation is the same, but the 4% amount is pro-rata based on the number of days remaining in the year as a percentage of the total days in the year. The maximum 10% calculation is not pro-rata – you can withdraw this amount even if the TTR pension was in existence for a partial year.

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How Much Can I Withdraw From a Transition to Retirement Pension

In order to satisfy the transition to retirement rules, you are permitted to withdraw the minimum pension amount, the maximum pension amount, or any pension figure in-between the minimum and maximum amount.

An example of how the calculation of the transition to retirement minimum and maximum withdrawal amounts work is as follows:

If you were to start a TTR pension on 1 July with $500,000, the minimum and maximum income amounts would be calculated as:

Minimum income = $500,000 x 4% = $20,000

Maximum income = $500,000 x 10% = $50,000

This means you would be able to withdraw between $20,000 and $50,000, inclusive, in that financial year. The income could be received weekly, fortnightly, monthly, half-yearly, or one-per year; provided that no less than $20,000 was received in total throughout the year and no more than $50,000.

If you were, instead, to start a TTR pension part-way through the year on, say 18 May, the minimum amount would be pro-rata, but the maximum amount would not – calculated as:

Minimum income = ($500,000 x 4%) x (43/365) = $2,356 (rounded to nearest $10, so $2,360)

Maximum income = $500,000 x 10% = $50,000

How Does Age Affect TTR Pension Minimum and Maximum Withdrawals?

As you get older, the minimum pension withdrawal amount associated with superannuation retirement income streams increases. However, the pension factor of a transition to retirement pension is not altered by your age. The reason for this is because, once you reach age 65, you have met a full superannuation condition of release, which means your transition to retirement effectively converts to an ordinary account based pension, which has no maximum threshold. Age 65 does result in the minimum factor increasing from 4% to 5%, but your pension is no longer a transition to retirement pension, due to your age.

Therefore, between your preservation age and age 65, your minimum and maximum TTR pension income percentage factors will always be 4% and 10%.

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Thanks for stopping by - Chris