TTR pensions still attractive for clients, says advice firm
Despite the government’s proposed changes to transition to retirement (TTR) superannuation pensions, there are still many situations in which they are an effective strategy, according to one financial advice firm.
The budget proposed that, from 1 July 2017, earnings on assets that support a TTR strategy would have the same tax treatment as funds in the accumulation phase.
While there will be a higher tax bill, there are other advantages for clients that accountants should be aware of.
“These include gaining access to up to 10 per cent of a super account annually once the member has reached their preservation age, in most cases 60,” said Dixon Advisory executive chairman Darryl Dixon.
“After age 60, the annual TTR pension will remain tax-free under the proposed changes.”
Mr Dixon said this will provide a strong incentive for people with credit card, mortgage debt to start or continue with TTR after age 60.
This mirrors the sentiment of BT Financial Group’s head of financial literacy and advocacy, Bryan Ashenden, who has cautioned against speculation that the worth of a TTR strategy is only valid if the generous tax benefits remain.
“Consideration should be given to the many reasons why a TTR has been, and will remain, a valid option for many members as they reach their preservation age,” Mr Ashenden said.
“The only scenario where there may be cause to consider ceasing to utilise a TTR is where a member is drawing income that is surplus to their needs and would otherwise be recontributing that amount back to their super fund.”