Are you “Retired” by the definition to set up a Pension?

There are two types of Pensions you can set up in a SMSF which are Account Based Pension & Transition to Retirement Pension.

Many clients are confused as to which Pension they should start. However, the fact is that there is really no choice. Depending on your age and your work status, you can only set up one or another. Below table sums up the mystics behind it;

pension defintion

In order to determine which Pension to set up, the definition of “Retirement” is important.

The definition of “Retirement” will vary depending on your age. If you’re aged 60 and over, “Retirement” means you simply cease your employment. In this case the intention to return to the workforce is irrelevant.

If you’re aged between 55 and 59, “Retirement” means that at the time you ceased employment, you never intended to work again either full-time or part-time (working more than 10 hours per week).

There are several questions we get asked frequently regarding “Retirement” and we list the answers below;

Can I reduce my hours with the same employer rather than ceasing employment to be considered ”Retired”?

No, you cannot just reduce your hours to be considered retired. You MUST cease employment.

Can I return to work after retiring?

Signing a retirement declaration does not preclude you to returning to work. The declaration relates to the person’s current intention at the time of retiring. Therefore, yes, you can return to work after retiring. However, the intention to retire at the time of retiring must have been genuine.

What happens to my Account-Based Pension if I return to work?

The Account Based Pension can continue to be paid if the retiree changes his mind about remaining retired. However, If you’re aged between 55-64, you will not be allowed to set up another Account Based Pension whilst working. If you wish to set up another pension, it will have to be Transition to Retirement Pension (TRAP).

I am less than 55 and Retired. Can I access my super benefits?

No, if you’re under 55, you cannot gain access to preserved super benefits because of retirement.

Superhelp offers free Pension Set Ups for clients over 60. Please call us now on 1300 736 453 if you would like to find out more about this great offer.

 

Article Disclaimer: This information should not be considered personal financial advice as it is intended to provide general advice only. The article has been prepared by Superhelp Australia Pty Ltd without taking into account your personal objectives, financial situations or needs. 
 
The information contained in the article may not be appropriate to your individual needs therefore you should seek personal financial advice before making any financial or investment decisions.