- 01At 60+, leaving a job can unlock pension access while working.
- 02Pays 0% tax on earnings (vs 15%).
- 034% minimum drawdown; new money stays in accumulation.
One of the most difficult parts of retirement is learning when to start using your superannuation to provide an income.
As I've written before, many people wait for much too long to convert their superannuation savings from accumulation mode into a pension account, a change that cuts the 15% tax on earnings to zero.
One of the more common reasons given for leaving your superannuation in the higher tax accumulation mode is that you are still working or intend to keep working so it doesn't make sense to switch the fund from accumulation to pension mode.
However, making the change is not as difficult as many people think and can even happen while you are still working.
Condition of Release
To meet a what is known as a condition of release for your superannuation, it is important to realise that leaving any job, even a part time one, after the age of 60 can be a reason to switch your super to pension mode.
Even if you remain in another full time or part-time position, and even if you have multiple accumulation accounts, it is usually possible to switch them all into pension mode once you meet the condition of release by leaving a job.
Once you are over the age of 60, all that is required is to cease an employment agreement so that you have access to your pension money.
New Accumulation Account
What you will then need to do if you want to keep working is to start up a new accumulation account that you can use to deposit any more employer contributions, while consolidating all of your other accumulation funds into one fund and then turning on pension payments.
While superannuation is locked away or preserved until you meet a condition of release, these conditions become easier to achieve once you're over the age of 60.
The conditions of release include retiring, turning 65, becoming permanently incapacitated, and suffering severe financial hardship.
Once you prove to your super fund to their satisfaction that you have ceased an employment arrangement and are aged 60 or more, there should be no problems in changing your super account to pension mode.
Access Much Harder Before 60
Before the age of 60 access is much more difficult and you will not even be considered retired unless you don’t intend to work ten hours or more a week.
After turning 60, it doesn’t really matter what work plans you might have from then onwards.
Of course, you can’t access contributions to your new accumulation fund but even these will be accessible once you turn 65 or leave another job.
The only downside of moving your super into the pension phase is that you will need to draw a pension, which starts at 4% a year and steadily rises as you get older.
If for some reason you don’t need that income, it is a simple matter to recontribute the money to your accumulation fund, with the added bonus being that it will be a non-concessional contribution that will remain in the “tax free” part of your super account.
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