Transition to Retirement Scheme: What Australians Need to Know in 2026

The transition to retirement scheme allows Australians who have reached their preservation age (between 55 and 60, depending on birth year) to draw a regular income from their superannuation, even if they continue working. This approach is intended to give older workers flexibility to reduce their working hours without a significant drop in income.

A TTR pension is a type of account-based pension. While you are still working and under age 65, you can only access your super as regular income payments, not as lump sums. The rules set a minimum and maximum annual withdrawal amount—typically between 4% and 10% of your TTR account balance each financial year.

Key Features of TTR in 2026

• Preservation age: The minimum age to start a TTR pension is between 55 and 60, depending on your date of birth.
• Income stream only: Withdrawals must be regular payments within set limits; lump sums are not permitted until you retire or turn 65.
• Tax treatment: For those aged 60 and over, TTR pension payments are generally tax-free. For those under 60, payments may be taxed at your marginal rate, with a partial tax offset.

Superannuation rules are updated regularly, and several changes apply in 2026 that may affect your TTR strategy:

• Transfer balance cap: The cap on the amount you can transfer into retirement phase income streams has increased to $1.96 million from 1 July 2026. This affects how much of your super can move into a tax-free retirement phase.
• Drawdown rates: The temporary reduction in minimum drawdown rates has ended. The standard minimum (4%) and maximum (10%) withdrawal rates for TTR pensions apply in 2026.
• Contribution caps: The concessional (before-tax) contributions cap is $30,000 per year, and the non-concessional (after-tax) cap is $120,000. This provides more scope for salary sacrifice strategies alongside TTR.
• Indexation: Both preservation age and transfer balance cap are indexed, so it’s important to check your personal thresholds as you plan.

Once you fully retire or reach age 65, your TTR pension can convert to a standard account-based pension, removing the maximum withdrawal limit and offering more flexibility.

A TTR strategy can suit a range of people, including:

• Workers aged 55–65 who want to reduce their work hours without a big drop in income
• Those aiming to boost super savings through salary sacrifice while drawing a TTR pension
• People looking to gradually transition from full-time work to retirement

TTR can be especially helpful if you want to cut back work for health or family reasons, or if you’re seeking a better work-life balance as you approach retirement.

Benefits

• Flexibility: Reduce your work hours while maintaining your income.
• Tax advantages: For those aged 60 and over, TTR pension payments are generally tax-free. Salary sacrifice arrangements can also reduce your taxable income.
• Smoother transition: TTR can help you adjust to retirement gradually, both financially and emotionally.

Drawbacks

• Impact on super balance: Drawing from your super before full retirement may slow its growth or reduce your balance, especially if withdrawals exceed investment returns.
• Complexity: TTR strategies can be complex and may not suit everyone. The benefits depend on your age, income, super balance, and retirement plans.
• Withdrawal limits: Until you retire or turn 65, you can only access your super as regular income payments within set limits—no lump sums.

A common approach is to start a TTR pension and use it to supplement your income as you reduce your work hours. Some people also increase their salary sacrifice contributions to super, taking advantage of the higher concessional cap in 2026. This can help reduce your taxable income and potentially grow your super balance, while the TTR pension helps cover any shortfall in take-home pay.

For example, someone in their late 50s might reduce to part-time work, start a TTR pension, and salary sacrifice more of their pay into super. This combination can help maintain their income and may offer tax benefits, especially once they turn 60 and TTR payments become tax-free.

What Is Preservation Age?

Preservation age is the minimum age you can access your superannuation benefits under the TTR scheme. In 2026, this age ranges from 55 to 60, depending on your birth year. Knowing your preservation age is essential for planning when you can start a TTR pension.

Why Does Preservation Age Matter?

Your preservation age determines when you can begin drawing a TTR pension. Aligning your retirement plans with your preservation age can help you make the most of the flexibility offered by the TTR scheme.

For Those Aged 60 and Over

TTR pension payments are generally tax-free for people aged 60 and above. This can make a TTR strategy particularly attractive if you are approaching or have reached this age.

For Those Under 60

If you are under 60, TTR pension payments are taxed at your marginal rate, but you may be eligible for a 15% tax offset. It’s important to weigh the tax benefits against the potential impact on your super balance, especially if you are considering salary sacrifice arrangements.

1. Check your eligibility: Confirm your preservation age and ensure you meet the requirements to start a TTR pension.
2. Assess your finances: Review your super balance, income needs, and retirement goals. Consider how a TTR strategy fits with your plans.
3. Contact your super fund: Discuss your options and understand the terms, including drawdown limits and any fees.
4. Review regularly: Your needs may change as you approach retirement, so review your strategy at least annually or when your circumstances change.

• Long-term impact: Drawing from your super early can reduce your balance at retirement. Make sure you understand the long-term effects.
• Complexity: TTR strategies can be complex and may require professional advice.
• Changing rules: Superannuation rules can change, so stay informed about the latest updates.

What happens to my TTR pension when I retire or turn 65?

When you fully retire or reach age 65, your TTR pension converts to a standard account-based pension. This removes the maximum withdrawal limit and allows more flexibility in how you access your super.

Can I keep contributing to super while on a TTR pension?

Yes, you can continue to make both concessional and non-concessional contributions to your superannuation while receiving a TTR pension, subject to contribution caps.

Is a TTR strategy suitable for everyone?

No, a TTR strategy depends on your age, super balance, income needs, and retirement goals. It’s important to consider your personal circumstances and seek advice if unsure.

How often should I review my TTR strategy?

It’s a good idea to review your TTR strategy at least once a year, or whenever your circumstances or superannuation rules change.

The transition to retirement scheme remains a flexible option for Australians wanting to ease into retirement on their own terms. With updated rules in 2026, there are new opportunities and considerations for those approaching retirement age. Taking the time to understand how TTR works—and how it fits with your broader financial goals—can help you make confident decisions about your future.