John Wasiliev advises a reader wary about moving money into tax-free income phase because she didn’t know she could start another account-based pension later.
Q: I’m in my mid-60s and have about $1.25 million in super and about $300,000 outside super in the bank and in an investment fund. I’ve maximised my $300,000I haven’t started a pension with my super fund, Australian Super, because it seemed to me from reading the fund’s documents I am not able to contribute any more into super once I go from accumulation phase into retirement mode.
To start a retirement pension, says Peter Crump, a senior consultant in the private wealth division at BDO in Adelaide, you need to have met one of several rules that allows this to happen, called a. These rules include: turning 65; retiring from work after 60; or changing your employment circumstances after 60.
Further, the super in this pension account will be entitled to tax-free investment earnings. The trade-off for these tax entitlements is having to withdraw a fixed amount of your super each year based on your age. Up to age 75 you can add non-concessional or after-tax contributions, but you need to make sure you don’t exceed certain limits placed on contributions, which is not likely given your existing super and your overall savings.
If you are looking to add a further $300,000 to your super from savings, you should have the capacity to do so from July this year. But this is only if you wish to commit all your savings to super which may not be the most effective strategy for you.If you are over 65 or have ceased employment, then you should be able to transfer any new contribution balances across to an additional pension account with your provider.
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