What are the benefits of the Transition To Retirement plan?
Q.
My mother is 62 years of age and earns $26,000. She would like
to look at a transition to retirement plan. My father has retired
and they have been told if she salary sacrifices $10,000 this, with
other benefits, will enable him to receive a pension of $11,000.
Whilst this is good can you tell me what the normal benefits of a
transition to retirement are? How does she cover the shortfall in
her income?
A.
The effectiveness of transition to retirement pensions (TTRs)
depend on taking advantage of the difference between the 15%
contributions tax on monies salary sacrificed into superannuation
and the employees marginal tax rate. It is hard to see any benefit
for your mother in taking out a TTR as she is in the 15% tax
bracket now and any money she sacrificed to superannuation would
lose 15%. Ask the Adviser for a detailed feasibility showing where
the expected savings are to come from.
Each week financial advisor Noel Whittaker answers your
questions.
