A super strategy for 2008

Andrew Lowe

Transition to Retirement (TTR) represents the most significant superannuation income stream opportunity for 2008, according to a leading figure in the industry.

ING technical services manager Andrew Lowe said while TTR began in 2005 there was not a lot of take up until July 2007 with introduction of simpler super and tax free pensions, when TTR began to standout as a promising strategy for retirement planning.

“Remember, TTR is not a new product; TTR is another condition of release that gives us access to benefits that we otherwise wouldn’t be able to,” he said.

According to Lowe, there is a common misconception surrounding TTR and its effect on the accessibility of super benefits.

“In fact, TTR increases accessibility, not the other way around. I see clients in particular focusing on two elements of TTR. Firstly, the 10 per cent cap on the maximum amount you can draw down from super. Secondly, there is a restriction to take the benefits as a lump sum.

“But this is my point: there are no greater restrictions than don’t currently exist for the client’s accumulated super benefits. We’re not exposing the client’s super benefits to any greater preservation than [they’re] already subject to,” Lowe said.

Lowe said another common question is what happens after the client meets a normal condition of release.

“The answer, thankfully, is nothing much, you simply now have access to the benefits. There is no recalculation of tax deductible amounts, no recalculation of social security non-assessable amounts and there’s no change to existing income streams.”

According to Lowe, it is also important that clients know that they are not locked in to that existing income stream.

“Clients can transfer back to super, or transfer to another TTR income stream at any point. Again, once they meet another condition of release benefits become fully unrestricted non-preserved.”