Transition to Retirement (TRIS)
What is a pension?
A pension is defined as an income stream received by an individual generally upon retirement. An SMSF’s sole purpose is to provide retirement benefits to its members upon retirement i.e paying pensions.
Types of pensions
Generally there are two types of pensions: Transition to Retirement Pension (TRIS) and Account Based Pension (ABP).
Transition to Retirement
A Transition to retirement pension or TRIS is designed to help the individual transition into retirement. This is usually done by cutting back working hours (e.g. working part time instead of full time) and then supplementing the reduced income with an income stream from the SMSF.
A condition of release must be met to be able to access the TRIS income stream. The most common condition of release is attaining preservation age. An individual is said to attain preservation age at the age of 55 if born before 1 July 1960.
When can I start taking a pension?
As stated above a condition of release must be met before an individual can receive a pension. Common conditions of release are:
- Attaining preservation age
Do I pay tax on pensions?
If an individual is under 60, the individual will have to pay tax on any money received as pension. Once the individual is over 60 all pensions are tax free.