Transition to Retirement

Since the introduction of Transition to Retirement rules in 2005 non-commutable allocated pensions (NCAPs), have become a popular strategy used by people over age 55 wishing to access their super without retiring.
 
NCAPs (also known as Transition to retirement income streams - TRIPs) in a nutshell!
 
Essentially, NCAPs allow people to access their superannuation savings without retiring permanently. This is because an NCAP is a type of allocated pension, governed by the normal pension laws that regulate payments.
 
One key difference between an NCAP and a pension is that, being non-commutable; lump sum withdrawals aren’t permitted. The amount paid in regular installments depends on the original set up and the age of the beneficiary.
 
NCAPs are a tax effective way of generating additional cashflow for a person reducing their working hours without compromising their lifestyle. It’s also a useful strategy for those wishing to sacrifice additional funds into superannuation.   
 
With the introduction of the Simpler Super legislation, NCAPs or TRIPs will become even more effective.
 
For people over age 60, after July 2007, any income stream derived from their super will be completely tax free to the individual.
 
Key features
• Can only be started once a person reaches preservation age
• Purchased with superannuation money
• No work test applies (a person doesn’t have to reduce their work hours)
• Same taxation as ordinary allocated pensions
• Commutations (ie lump sum withdrawals) are not generally allowed
• Under the new Simpler Super rules, the maximum annual pension draw down allowed will be 10% of the purchase price
 
If you think this is for you, contact us at AAM Townsville.