What is "Transition to Retirement"?

The Transition to Retirement measures allow people nearing retirement (see below for specific eligibility criteria) to access their accumulated superannuation in the form of a non-commutable income stream. ?Non-commutable? simply means that you cannot withdraw a cash lump sum from your superannuation funds under the measures.

The most important consideration when setting up a non-commutable income stream is to make sure that the arrangements being made are in compliance with the provisions of the Transition to Retirement measures. Pensions specifically set up to comply with the measures are sometimes called "Transition to Retirement Allocated Pensions" (TRAPS). TRAPS are, as the name suggests, transitional in nature and can therefore eventually be superseded by a more permanent arrangement.

Making use of Transition to Retirement using an allocated pension does not mean that you permanently waive the right to withdraw a cash lump sum from your fund. The ?normal? rules governing withdrawals will come back into play if you:

• Retire permanently
• Cease your current employment after 60 (even if you intend to seek other work)
• Reach the age of 65
• Become permanently incapacitated

It is also possible to take out a general non-commutable pension or annuity (i.e. one that is not specifically set up to comply with Transition to Retirement). However, these are more permanent in nature and may also include certain long-term restrictions on withdrawing lump sums. You should therefore make sure that you clearly understand the terms and conditions of what you are signing up to.

It is highly advisable that you discuss all your options with a financial adviser with experience in this area before making a final decision on how to set up your non-commutable income stream.