TTR vs Account Based Pension: What Changes When You Retire?

A transition to retirement pension and an account based pension are both super income streams.

The main difference is whether you are still subject to restrictions on accessing your super.

A TTR gives you limited access to super after reaching preservation age when you have not yet met a condition of release with no cashing restrictions.
A standard account based pension becomes available once you meet an unrestricted condition of release or turn 65.

Importantly, continuing to work does not always mean you must remain in a TTR. From age 60, you may be able to meet a full condition of release by ceasing an employment arrangement, even if you continue working elsewhere.

If you need a refresher on account based pensions, start here:
Account Based Pension Explained

If you want the full breakdown of TTR strategies, see:
Transition To Retirement Pensions Explained

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What is preservation age?

Preservation age is the earliest age at which you may be able to access your super under the transition to retirement rules.

For anyone born on or after 1 July 1964, preservation age is 60.

People born earlier had preservation ages between 55 and 59.

Reaching preservation age allows you to start a TTR if you meet the relevant requirements.
It does not automatically allow unrestricted access to your super.

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What is a TTR?

A transition to retirement income stream allows you to:

• Access some super after preservation age
• Continue working
• Supplement income while reducing work hours or increasing salary sacrifice contributions

If you are under 65 and have not met a condition of release with no cashing restrictions:

• You must withdraw at least the minimum percentage
• You cannot withdraw more than 10 percent of the balance each financial year

This maximum limit is a key difference.

The TTR is considered non-commutable while these restrictions continue. That means you generally cannot freely convert the pension into lump sum withdrawals until you meet a condition of release with no cashing restrictions.

For the detailed withdrawal rules, see:
TTR Minimum & Maximum Drawdown Rates

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What is a standard account based pension?

A standard account based pension applies once you meet a condition of release with no cashing restrictions.

This can include:

• Retiring after reaching preservation age
• Ceasing an employment arrangement after age 60
• Turning 65
• Permanent incapacity
• Terminal medical condition

You may still be working in some circumstances after gaining unrestricted access to your super.

Once the pension is in retirement phase:

• There is no maximum withdrawal limit
• Investment earnings are generally tax free
• The pension counts toward your transfer balance cap

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Side by side comparison

The structural differences are significant.

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Tax treatment differences

TTR

If the TTR has not yet moved into retirement phase:

• Investment earnings supporting the TTR are generally taxed at 15 percent inside the fund.
• If you are aged 60 or over and the payments come from a taxed super fund, the pension payments you receive are generally tax free.

This distinction is important. The tax paid on investment earnings inside the fund is separate from the tax treatment of pension payments you receive personally.

Once the TTR moves into retirement phase:

• Investment earnings supporting the pension become generally tax free.

For more detail, see:
Tax on a Transition to Retirement Pension

Account based pension

• Investment earnings are generally tax free in retirement phase.
• Payments from taxed funds are generally tax free from age 60.

This tax difference can materially affect long term outcomes.

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Simple example

Liam is 60 and still working.

He starts a TTR with $500,000.

He must withdraw at least the minimum and cannot withdraw more than 10 percent.

Investment earnings supporting the TTR remain generally taxed at 15 percent inside the fund while he has not met a condition of release with no cashing restrictions.

Two years later, Liam retires.

He notifies his super fund that he has met the relevant condition of release.

His TTR then moves into retirement phase:

• The 10 percent maximum disappears.
• Investment earnings become generally tax free.
• The pension counts toward his transfer balance cap.
• It now operates like a standard account based pension.

Same structure. Different phase.

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When does a TTR become a standard pension?

A TTR automatically moves into retirement phase when:

• You turn 65

It can also move into retirement phase if you meet another condition of release with no cashing restrictions, such as:

• Retirement after reaching preservation age
• Permanent incapacity
• Terminal medical condition

Where the transition happens because you meet one of these conditions before age 65, you generally need to notify your super fund.

Once the TTR moves into retirement phase:

• The 10 percent withdrawal cap no longer applies
• Investment earnings become generally tax free
• The pension counts toward your transfer balance cap
• It functions like a standard account based pension

For a more detailed explanation of the age 65 transition, see:
What Happens to a TTR Pension at Age 65?

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Strategy differences

A TTR is typically used for:

• Reducing work hours
• Supplementing employment income
• Combining pension payments with salary sacrifice or other super contributions
• Managing the transition toward retirement

A standard account based pension is typically used for:

• Funding retirement income
• Managing drawdown in retirement
• Long term retirement phase planning

They generally serve different stages, but the dividing line is the condition of release rather than simply whether you are still working.

If you are considering a TTR and want to model pension payments and the effect on your take-home income, try the Transition to Retirement Calculator.

If you are still several years away from retiring and want a broader framework for the transition, see my retirement planning guide for Australians 5 to 10 years out.

If you want help planning your transition from a TTR pension into full retirement, learn more about my retirement planning service.

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FAQs

What is the main difference between a TTR and an account based pension?

A TTR gives you limited access to super after preservation age when you have not yet met a condition of release with no cashing restrictions. A standard account based pension becomes available once you meet an unrestricted condition of release or turn 65, and it has no maximum withdrawal limit.

Are earnings taxed differently in a TTR?

Yes. While a TTR remains outside retirement phase, investment earnings supporting it are generally taxed at 15 percent inside the fund. Earnings supporting a retirement phase account based pension are generally tax free.

Does a TTR count toward the transfer balance cap?

A TTR only counts toward the transfer balance cap once it moves into retirement phase.

Can a TTR become an account based pension?

Yes. A TTR automatically moves into retirement phase at age 65. It can also move into retirement phase after another condition of release with no cashing restrictions is met and the super fund has been notified where required.

What is preservation age?

For anyone born on or after 1 July 1964, preservation age is 60. People born earlier had preservation ages between 55 and 59.