A senior industry executive has reminded practitioners to consider the types of benefits an SMSF member has before they commence a transition-to-retirement income stream (TRIS) due to the drawdown rules for these pensions.
“When it comes to drawing down from a TRIS, they must be taken in a specific order. So [withdrawals] will firstly come from unrestricted non-preserved benefits, then it will come from restricted non-preserved benefits and then from preserved [benefits],” Institute of Financial Professionals Australia (IFPA) head of technical services Natasha Panagis explained.
“So for that reason it’s really important not to start a TRIS with unrestricted non-preserved benefits alone because that is the first component that will be drawn down on and you want to be able to keep that component separate so that you can access them at a given time and keep [the member’s options] flexible and available in case of an emergency.”
Panagis also took the opportunity to alert advisers and accountants to transfer balance account management in the event a TRIS converts to a retirement-phase interest upon an SMSF member satisfying a full condition of release.
In particular, she emphasised this consideration is particularly important in situations where a client is turning 65.
“An automatic conversion from a TRIS to a retirement-phase [pension takes place] once [the member] turns age 65. So that will automatically convert, which will mean if you’ve got clients turning 65 before 30 June this year and they’ve got a large amount in a TRIS, say, for example, $3 million, you want to get them to commute the [amount over their available transfer balance cap] out before they turn 65,” she told delegates at the IFPA 2025 Conference and Expo held in Melbourne last Friday.
“Because once they turn 65, [the TRIS] turns into a retirement-phase pension and will cause them to exceed [their transfer balance] cap.”
Pension strategies will be covered in detail at SMSF Professionals Day 2025, co-hosted by selfmanagedsuper and Accurium. Please visit https://www.accurium.com.au/smsf-professionals-day/ to register.
