With the use of lots of acronyms and references to legislation, superannuation can certainly sound like a different language.
I will use this segment for the next few months to try to explain some of these terms in simple English.
TRIS – Transition to Retirement Income Stream, also known as Transition to Retirement Pension (TRIP)
A TRIS is a type of pension that can be paid even when a member is not retired, provided they have met their preservation age*.
The differences between a TRIS and the more usual Account Based Pension (ABP), include the following:
- You do not need to be retired to start a TRIS, but you must have met your preservation age*.
- A TRIS is non-commutable, meaning that you can’t just cash it in and have it paid as a lump sum.
- The pension requirements for a TRIS require you to take a minimum benefit (4% of the opening balance for the income year if you are under age 65) as well as imposing a maximum amount of benefit (10% of the opening balance for the income year).
- If the minimum and maximum benefits are not complied with the TRIS will cease at the start of the year of income, meaning that members may have withdrawn benefits that they were not entitled to in that year.
- The tax treatment for a TRIS differs to an ABP – there is no longer an ability to claim exempt current pension income on earnings from assets that support a TRIS.
- A TRIS can be converted to an ABP on meeting another condition of release, such as retirement.
* Your preservation age is the age that you can access your superannuation, provided that you have met a condition of release.
More details next month on preservation ages and on conditions of release!