“Transition to retirement pensions used to be taxed at zero, but that changed when the whole transfer balance cap thing came in, and they’re now taxed at 15 per cent like an accumulation account, so there’s less attraction there, but there’s still reasons why people would want to use them.”

Parker said one of the first reasons is personal cash flow needs.

“A TRIS was intended for transitioning to retirement, so if somebody didn’t leave the workforce altogether, but they might have dropped back from full-time work to two days a week, and their living expenses were more than two-fifths of their normal income, then they could use this facility to take out some super to top up the difference,” she said.

“Another reason to implement a TRIS is to equalise balances, incrementally, under the current rules.”

Parker gave an example of how this would work with a TRIS with two members, both 60 and both still working, who want to equalise their superannuation balances.

“One member has $2 million in his fund; if they started a transition to retirement pension, they could take out up to 10 per cent of that balance, in this case, $200,000, and give that to the other member. It’s an incremental change, but it’s a way to even [out] their balances slowly,” she said.

“The other thing that you would look at is separation of interests, which is something that we do for our account-based pension clients once they’ve retired, but this is a way to look at it early and start that process early.”

Parker explained that there are taxable and tax-free components in a superannuation balance, with the taxable component comprising employer contributions and concessional contributions throughout the member’s lifetime, as well as all the earnings of the fund throughout that time as well.

“The tax-free component is your non-concessional contributions, so because both members are over 60, these taxable and tax-free components don’t mean anything to them. They get everything tax-free anyway,” she said.

“Where these two buckets matter is when they retire or when they both pass away and leave money to their adult children. Anything in the tax-free bucket, their kids will pay no tax on, while anything in the taxable bucket they’ll pay 17 per cent tax.

“A lot of the work we do in account-based pensions, and that we can start to do in transition to retirement pensions, is to move money from that taxable component, where the kids will pay 17 per cent tax, to that tax-free component. It is something we can do during account-based pension time once people have retired, but having access to 10 per cent of the balance at a time enables us to do that earlier with transition to retirement pensions.”