By Peter Kelly on 7 February 2018
I realise we have spoken about this topic on many occasions, however, I plan to take a slightly different approach this time and provide some useful information to readers who may be planning to retire now, or in the coming months or years, and are looking to access their super.
The word ‘retirement’ means something different to everyone.
For some, it will be a time to hang up the work boots and relax – perhaps reading a book in the sun on the porch. Or, it may be a time to simply do what you ‘want’ to do – and not what you ‘have’ to do. It may be a time for travel and adventure; or a time to spend with family and friends. Retirement may be a time to care for others – be they elderly family members, or grandchildren.
As my fellow blogger, Mark describes it – retirement is ‘my time’.
The reality is that for most people, retirement will be a combination of all the things I mentioned above and more.
We each have a different idea of what our retirement will be.
However, that is not what I planned to talk about today.
Recently I have received a number of enquiries about accessing superannuation benefits before age 65 – which is the age when we can generally access our super.
Picture this – Lucy has, in her words, ‘had enough’ of working. She wants to retire.
If we have good look at superannuation law, we will see that we can generally access our super if we have reached our ‘preservation age’, provided we meet a ‘condition of release’.
Preservation age is based on an individual’s date of birth. If born before 1 July 1960, preservation age is 55. However, it then gradually increases and for those born on or after 1 July 1964, preservation age is 60.
Superannuation law includes two definitions of retirement – which only adds to the confusion. One for people under 60, and one for those aged 60 or over.
Where a person ceases to be gainfully employed before they turn 60, they are treated as having retired provided they have no intention of becoming gainfully employed again, for more than 10 hours per week.
So, if Lucy has reached her preservation age but she is under 60 years of age, she can only access her superannuation benefits if she has no intention of ever working again on either a part-time (10 to 30 hours per week) or a full-time (more than 30 hours per week) basis. If Lucy meets this criteria, she should inform her superannuation fund so they can record her super as being ‘unrestricted non-preserved’. This will allow Lucy to access her super benefits now or in the future.
Let’s say when Lucy retired, she had no intention to work again. But then, a year or two later she decides to return to gainful employment.
In this case, because her intention at the time she ceased gainful employment was not to work again, she had met the retirement condition. Her super benefits that had accrued at that time, will remain unpreserved. However, any new superannuation benefits that accumulate once she resumes working will be preserved. She will have to meet a new ‘condition or release’ before she can access those benefits.
Now, just to make things more interesting, let’s assume that Lucy didn’t retire until after she had turned 60.
The definition of retirement, according to superannuation law, changes.
Where a person ceases to be gainfully employed after they have turned 60, merely ceasing to be gainfully employed satisfies the ‘retirement’ test for accessing super.
The requirement to ‘never be gainfully employed again’ does not apply. In fact, if a person has more than one job, they only have to cease one of those jobs to be able to access their super that has accumulated up to that point.
In Lucy’s case, she could cease one job today and be planning to start a new job in a week’s time. Provided she is 60 or over at the time she ceases her employment, she is able to access her super.
While you and I might have a clear idea of what retirement means to us, when it comes to superannuation law, and the ability to access superannuation benefits, things are a little more complex.
Remember, if under 60, but have reached your preservation age, all gainful employment must have ceased, and you must have d there is no intention of working 10 or more hours per week in the future.
However, where an employment arrangement ceases on or after turning 60, super benefits may be accessed, irrespective of future employment intentions.
Having said all of that, once a person turns 65, they may access their super benefits irrespective of whether they are working or not. And, from preservation age, superannuation benefits can be accessed on a restricted basis as a ‘transition to retirement’ pension. But, more about that another time.