Transition to Retirement Scheme: Guide for Australians (2025)

Australians are living longer, and for many, the idea of a sharp full-stop at retirement is fading. The transition to retirement (TTR) scheme has become a practical solution—allowing older workers to reduce their working hours without sacrificing income. But with superannuation rules evolving in 2025, understanding the ins and outs of TTR is essential for anyone approaching retirement age.

What Is the Transition to Retirement Scheme?

The TTR scheme is a government-designed option that enables Australians who have reached their preservation age (between 55 and 60, depending on birth year) to access a portion of their superannuation as an income stream, even if they’re still working. The goal: offer flexibility for those wanting to scale back work without a big drop in take-home pay.

In 2025, the TTR pension remains a “non-commutable” account-based pension. That means you can’t withdraw lump sums—just regular payments, within set limits. You can access between 4% and 10% of your TTR account balance each financial year.

• Preservation age: This is the earliest you can start a TTR pension. In 2025, it ranges from 55 to 60.
• Work flexibility: You can reduce your work hours and supplement your income from your super.
• Tax efficiency: There are tax concessions, especially for those aged 60 and over, as TTR pension payments become tax-free.

2025 Updates: Superannuation and TTR Rules

Superannuation laws change regularly, and 2025 brings several updates that affect TTR strategies:

• 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 2025, up from $1.9 million. This impacts those looking to maximise tax-free retirement income.
• Minimum/maximum drawdown rates: Temporary COVID-19 relief halving minimums has ended. The standard 4% minimum (based on age) and 10% maximum for TTR pensions apply in 2025.
• Contributions: The concessional (before-tax) contributions cap is now $30,000 per year, and the non-concessional cap is $120,000. This opens more room for salary sacrifice strategies alongside TTR.
• Indexation: Both preservation age and transfer balance cap are indexed, so always check your personal thresholds as you plan.

Importantly, once you fully retire or turn 65, your TTR pension converts to a standard account-based pension, with no maximum withdrawal limit and more flexibility.

Who Should Consider a TTR Strategy?

TTR isn’t just for those desperate to quit work. It’s best suited to:

• Workers aged 55–65 looking to reduce hours without cutting their income
• People seeking to boost super savings via salary sacrifice
• Anyone wanting to smooth the shift from full-time work to retirement

For example, Sarah is 59, works four days a week, and has $400,000 in super. She starts a TTR pension, drawing $24,000 a year (6%). Simultaneously, she increases her salary sacrifice, lowering her taxable income. At 60, her TTR payments become tax-free, maximising her after-tax position while letting her enjoy more leisure time now.

Key benefits:

• Greater work-life balance as you approach retirement
• Potential to pay less tax through salary sacrifice and TTR income
• Ability to top up income if you need to cut back work for health or family reasons

Potential downsides:

• Super balances may grow slower or even decline if withdrawals exceed investment returns
• Complexity—TTR strategies work best when tailored to your tax bracket and goals
• Limits on lump sum withdrawals until you fully retire or reach age 65

Smart Ways to Use a TTR Pension in 2025

With the higher concessional contribution cap in 2025, the classic TTR “recycling” strategy is back in focus. Here’s how it works:

• Start a TTR pension, drawing an income stream
• Increase your salary sacrifice contributions to super (within the cap)
• This can reduce your taxable income and boost your overall super balance, especially if your employer allows flexible salary packaging

For high-income earners, this could mean thousands in annual tax savings. For part-timers or those with caring responsibilities, TTR bridges the income gap without draining savings outside super.

As always, the effectiveness of a TTR strategy depends on your age, super balance, income, and retirement timeline. With the 2025 rules, there’s more flexibility than ever—but also a need to crunch the numbers to avoid eroding your nest egg too quickly.

The Bottom Line

The transition to retirement scheme remains a valuable tool for Australians wanting to take control of their retirement journey. With 2025’s rule changes—higher contribution caps, indexed thresholds, and the return of standard minimum drawdowns—TTR is more adaptable than ever. Whether you want to wind down work, manage tax, or top up your super, a TTR strategy could smooth your path to retirement.