Retirement, Strategy, Superannuation

TRIS now a short-term strategic tool

TRIS should now only be a short-term income stream and strategy.

A transition-to-retirement income stream (TRIS) should be viewed purely as a short-term strategy to enable SMSF members to withdraw money from the accumulation account of the fund, a sector strategist has said.

“Effectively a TRIS now sits on the accumulation side of the fund and it’s not going to sit on the pension side. A TRIS is not a pension, it’s a short-term income stream,” I Love SMSF director Grant Abbott told attendees at a seminar in Sydney today.

“So if you set up a TRIS for your client, because you’re not getting tax benefits in the fund, it should always be a short-term TRIS. The only purpose of setting up a transition-to-retirement income stream is in order to pull that money out of the system.

“And it’s not coming out of the pension side, it’s coming out of the accumulation side.”

Abbott suggested the short-term nature of a TRIS now means when the purpose of starting one of these arrangements has passed, that is, when the member no longer needs to draw funds down from the accumulation side of the SMSF, the TRIS should be commuted.

He pointed out should the need arise again for a particular member to draw funds from the accumulation side of an SMSF, another TRIS can then be commenced.

“It means you can effectively have a three or four-month income stream that is in accordance with all of the annuity and pension laws,” he said.

Treating a TRIS as a short-term strategy will mean they no longer need to be considered from an estate planning perspective, he noted.

“The issue of whether a TRIS should be reversionary for estate planning is a furphy because it’s always going to sit in the accumulation account,” he said.

To that end, he recommended the rules governing a TRIS should state it will play no part in a member’s retirement years in its current form.

“The terms of the TRIS should state it will automatically convert to an account-based pension when the member retires,” he said.

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