Advisers should reconsider the transition-to-retirement income stream (TRIS) strategies they apply for their clients due to the changed characteristics of these structures in the wake of the superannuation reforms, an SMSF expert has said.
According to I Love SMSF director Grant Abbott, advisers should now consider implementing fixed short-term TRIS strategies for their clients, seeing they now basically only serve one purpose since any associated tax benefit has now been eliminated.
“What’s the purpose of a TRIS anyway? There is only one purpose and that’s to get money out of my accumulation account,” Abbott told the official launch of his book, The Guru’s Guide to Self-Managed Super Funds, held in Sydney today.
He added in light of this fact, there would be no need to keep a TRIS in place once the income stream recipient had met a condition of release that would trigger the transfer of the TRIS from the accumulation account into the pension account of the SMSF.
“Why wouldn’t I have a three-month TRIS? What’s the purpose of keeping it going?” he said.
The amount of income a client wanted to receive would then determine the size of the TRIS and this in some cases could be the entire value of the accumulation account, he suggested.
If the SMSF member wanted to make additional contributions, the existing TRIS could be commuted and a new TRIS commenced if the need for more income from the accumulation account was required due to the short-term nature of the strategy, he noted.
“So I could set [a new TRIS] up for a month and then close it and in that month what have I done? I’ve pulled out the 10 per cent, or 5 per cent, or the 8 per cent [of the TRIS] that I wanted,” he said.
“So now what we have is fixed short-term TRISs and all this hullaballoo about what’s going to happen in the event of someone doing this, or TRISs turning into pensions, to me are all irrelevant because we’ve solved the problem.
“The TRIS we put in was to access money from the accumulation account.”