Starting a retirement phase pension after the age of 60

Meet Sally. Sally turned 60 a few years ago. Shortly after turning 60, she ended her job and started a new job with a different employer, where she continues to work full time. Sally wants to know whether she could start an account-based pension now or whether she must wait until she turns 65. Her SMSF member statement shows all of her benefits as being preserved.

To determine if Sally can access her superannuation without restriction, let’s find out if Sally has satisfied the “retirement” condition of release. The “retirement” condition of release has two definitions. The first is the “permanent retirement” definition and the second is “ceasing gainful employment after age 60”.

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To satisfy the “permanent retirement” definition, one must have:

• reached their preservation age (which is age 60 for most),
• ended a paid employment arrangement (at some point in their lives), and
• satisfied the trustee of their super fund that they do not intend to work in a paid position again for 10 or more hours per week.

Since Sally is still working full time and plans to keep doing so, Sally won’t be regarded as “permanently retired”.

But what about the second definition of retirement? It involves leaving a gainful employment arrangement after turning 60. A person can satisfy this definition by simply ending a paid job once they are at least age 60.

Sally has satisfied this second definition and triggered a condition of release on the day she ended her first job as she had already turned 60. The balance of her superannuation on the day she left her job can be reclassified as “unrestricted non preserved”. This portion of her benefit will always remain unrestricted – even though Sally started another job and is still working full time.

This means Sally can access her unrestricted benefits “now” including commencing an account-based pension (subject to her transfer balance cap of course). It will be necessary to calculate the balance of Sally’s accumulation account on the day she ended her employment arrangement, as that is the maximum amount with which she could commence a pension. This could be a bit tricky, given the cessation happened a few years ago.

Calculations determining Sally’s member balance at the date she ceased employment will be required as well as evidence of when Sally ceased the employment arrangement, such as a final pay slip or letter confirming her cessation of employment.

What about the rest of Sally’s member balance that has come about from earnings and super contributions since Sally left her first job? These benefits will remain preserved until Sally meets another condition of release, such as ending another employment arrangement, permanently retiring or turning 65.