A TRP is an investment account you can start with superannuation money at age 55 or over. A TRP enables you to receive a tax-effective income (within certain limits[1]) and can be used in a range of scenarios.

How can you benefit?

If you plan to scale back your working hours, a TRP can provide an income to replace your reduced salary. For example, if you cut back from a five-day to a three-day working week, a TRP can replace the income you’ve lost and help you maintain your living standard. For a case study that demonstrates how this works, visit mlc.com.au.

Alternatively, if you keep working full-time, you can make salary sacrifice or personal deductible contributions into your super fund and invest some of your existing super in a TRP.

The upshot of this strategy is you’ll pay less tax and the income payments from the TRP can replace the money you invest in super. As a result, you can increase your retirement savings while maintaining your current lifestyle.

Keep your options open

If you aren’t yet eligible or don’t plan on using a TRP, there are other options for boosting your super. You can:

• make concessional contributions up to the concessional contribution cap, and
• invest additional money in super as a personal after-tax contribution. This will, however, count towards the cap on non-concessional contributions[2].

While non-concessional contributions are generally not as tax-effective as concessional contributions, taking advantage of this additional cap could still be better than saving for retirement outside super.

We can assess your situation and help you decide how you can use a TRP to help you to achieve your lifestyle goals in the lead up to your retirement.

[1] The minimum income you must receive depends on your age and the maximum amount you are allowed to receive each year is 10% of the account balance.

[2] In 2010/11, the non-concessional contribution cap is $150,000. However, if you’re under age 65, it’s possible to contribute up to $450,000 in 2010/11, provided your total non-concessional contributions in this financial year, and the following two financial years, don’t exceed $450,000.