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Super & TRAP

What Is TRAP?

Transition to retirement allocated pension

A transition to retirement allocated pension is a type of pension that individuals can start from the age of 55 onwards, generally speaking, the transition to retirement pension is a pension that you would normally start whilst you’re still in the workforce. The pension actually came into being when the government found that a lot of individuals wanted not just to go into full retirement but they wanted the choice to gradually retire and move into a part-time basis. However, individuals didn’t have the access to their superfunds because of the fact that they were still employed essentially so they couldn’t access their superannuation to provide an income.

So the transition to retirement allocated pension allows you to start drawing on some of your superannuation within limits whilst you’re still working. For individuals who do not wish to reduce their working hours the TRAP can be a great mechanism by which to save money on tax and help build your super in those final years’ pre-retirement.  The strategy works by simultaneously starting to Salary Sacrifice into superannuation from your salary whilst at the same time starting a transition to retirement pension to replace the income affected by salary sacrificing. The benefits are that whilst you may pay up to 46.50% in tax within your salary the tax on any contributions (including Salary Sacrificing) is a flat 15%. Therefore, by taking some of your pre-tax income and directing it towards your superannuation you may be saving potentially up to 31 cents in every dollar salary sacrificed. There are limitations to this strategy that you must be aware of, contribution caps and maximum pensions can affect the strategy for your situation thus it is best to speak to our advisors about how this mechanism can work in your particular situation.



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A highly experienced senior financial adviser with an extensive background in developing comprehensive financial strategies for clients.



Stefan is a founding Director and CFO of VFS. He has over 10 years’ experience in financial services, specialising in Self-Managed Superannuation and Tax Planning advice.