Mark Ellem, head of education for Accurium, says from a practice perspective, whether it is an accountant, administrator or an adviser, it’s important to know “ahead of the game” when a client with a transition to retirement income stream (TRIS) turns 65 in the event they have an excess transfer balance account (TBA) because their TRIS is greater than the general transfer balance cap (TBC).
“Even in this year, in the lead up to the general transfer balance cap increasing to $2 million on 1 July 2025, if you’ve got a client who has a TRIS non-retirement phase, and they’re turning 65 anytime between now and 30 June, that’s going to give a rise to a transfer balance account credit, which means that’s going to affect their entitlement to the increase in the general transfer balance cap – the $100,000,” he said.
“So, you need to consider it. Is that what they want? Or do they want to commute it before their 65th birthday in an accumulation account and get the full $100,000 and then start a retirement phase account-based pension afterwards?”
Ellem said as a financial professional, it’s important to talk to clients coming up to age 65 about their options, the implications of their choices on tax and TBC, without overstepping and making recommendations.
“It’s not a case of, ‘Oh, they turned 65 yesterday. It’s too late’. It’s OK. They met a retirement condition of release,” Ellem said.
“[At that point] all their money became unrestricted, not preserved, but it’s not until they notify the trustee that they have met a condition of release that they will move into pension phase, so it gives some time to manage things.”
He continued that when the TRIS moves into the retirement phase, it doesn’t affect the calculation of the minimum pension requirement, but the maximum amount drops off.
“However, for retirement phase purposes, for transfer balance cap purposes, it’s treated as a brand new pension.”
“When [the pension] moves into retirement phase, that is the value of the TBA credit, and when that occurs, that’s going to dictate the due date [of when payments need to be made] – 28 days after the end of the quarter. From that point on, it moves into retirement phase and the fund will be eligible to claim exempt current pension income in respect to that capital.”
