Commuting a transition-to-retirement income stream (TRIS) and replacing it with an account-based pension when an SMSF member attains a nil-cashing condition of release to ease the administrative burden for trustees is likely to be a flawed and unnecessary strategy, a leading industry actuary has said.
“I would say, in the normal course of events, it would lead to more administrative work to commute the TRIS and start a new account-based pension,” Accurium principal Melanie Dunn told online delegates at SMSF Professionals Day 2025, recently co-hosted by selfmanagedsuper and Accurium.
“When a nil-cashing condition of release, such has attaining age 65, is met and the member has a TRIS, that TRIS [automatically] reverts to [become a retirement-phase interest], which for all intents and purposes operates pretty much like an account-based pension.
“So unless there is something curly about the pension documents or the trust deed that limits the use of the TRIS in the way the law now allows you to use a TRIS in retirement phase, it’s probably less work just to let that TRIS continue.”
According to Dunn, there are other elements to be considered with regard to this course of action aside from fund administration.
“There are other reasons why [it would] make a lot more sense [to allow the TRIS to continue]. If you commute the TRIS and you’ve got accumulation interests, you might end up mixing tax components in the fund,” she warned.
“[Also] you’ll have to [draft] new documentation if you stop [the TRIS] and restart it as an account-based pension.”
Further, Accurium head of SMSF education Mark Ellem recognised the additional trustee obligations that would arise from commuting a retirement-phase TRIS and replacing it with an account-based pension.
“If you did commute the TRIS and started an account-based pension, you’d have to pay a pro-rata minimum pension on the TRIS first before you commuted it and then you’d have a pro-rata minimum payment for the new account-based pension, unless it’s started on or after 1 June in the income year,” Ellem said.
“So I agree with you [Melanie], it’s probably administratively easier [to keep the TRIS going].”
