Understanding the $1.6m pension transfer balance cap and how it can benefit your retirement

Individuals can transfer up to $1.6m of their superannuation each into pension phase at retirement to receive a tax free income stream – by taking advantage of smart financial planning you can drastically reduce your tax burden in retirement and boost your quality of life.

Most Australians are aware that superannuation is a vehicle for retirement savings – but few realise just how effective a means it can be towards helping you maintain your current standard of living once you choose to stop working.

Once you reach your respective Preservation Age (for most Australians this is age 60) you can convert your superannuation from ‘accumulation’ phase to ‘pension’ phase. Doing so allows you to draw down a tax free pension stream which will ideally replace your income once you cease working. Australians are eligible to transfer $1.6m each in their superannuation into pension phase – a 5% investment return and withdrawal would net approximately $80,000 each tax free. Compare this to $1.6m of assets held outside of superannuation – any income from these assets would remain taxable and severly reduce your cashflow in retirement. If you’ve worked hard your whole life why continue to pay tax once you’ve retired?

But how does one build up $1.6m in superannuation to maximise the tax-free income received in retirement? AWS Financial Planning specialise in strategies to move assets into superannuation where they can accumulate in a tax friendly environment before you draw down a tax free pension. This may involve the staged contribution of property equity into your superannuation – this simple restructuring of your assets can provide major boosts to your income later in life.

If you would like to know more, feel free to download our free information booklet by completing the contact form on the right.

Alternatively get in touch with Managing Director Lindsay Yelland today on 0407 060 899 or lindsay@awsfp.com.au

Case study: $1.6m superannuation pension stream vs. $1.6m non-superannuation income stream

Clients often ask us how much it would really benefit them if they moved more assets to within the superannuation environment. The below case study illustrates how much tax can be saved over the course of one’s retirement by proactive financial planning.

The strategic movement of assets into superannuation leads to over $500,000 in tax savings. If you’ve worked hard all of your life, why continue to pay so much in tax? Contact us today to receive advice on how to maximise your happiness in retirement by utilising the full pension transfer cap.

This advice becomes even more important if your superannuation fund totals over $1.6m. Selecting the correct mix of superannuation assets to move into pension phase can have a large impact on your retirement income – as not of your superannuation can be transferred into pension phase it is essential to transfer the highest yielding investments into your pension stream account. Don’t work hard to build your wealth only to burden yourself with unneccesary tax after you choose to stop working.