For those aged over 55 and approaching retirement there is light at the end of the tunnel despite the turmoil in global financial markets.

Implementing a transition to retirement strategy may be all that is needed to claw back some of the losses being experienced by super funds in the current environment.

A transition to retirement strategy could restore up to 50 per cent of lost super over a 10 year period.
How? By combining a pension, which triggers a chain of tax breaks, with salary sacrificing, which adds even more tax breaks, all achieved by maintaining your current net after tax income. This is called a Transition to Retirement (TRR) strategy.

Under a transition to retirement pension, you must draw at least 4 per cent and no more than 10 per cent of the value of your super each year. When you draw a super pension, there is a 15 per cent tax offset available while earnings inside your fund become tax free. Once you are over 60 there is no tax in the fund and no tax on the pension. At age 65, there is no tax on in the fund, no tax on the pension and no restrictions on how much you take out.

Let's look at an example. A person aged 60 wants to retire at age 65. Their current gross annual salary (fully taxable) is $70,000 with no other income and their superannuation balance is $380,000 (which is taxed at 15 per cent a year).

Under a TTR strategy, to maintain the level of after tax income they currently receive ($54,000) they could salary sacrifice $23,721 to superannuation and take a TRR pension of $15,200 (minimum 4 per cent). As they are over 60, there is no tax on the TRR pension income or earnings from superannuation investments in the pension phase.

At age 65, the superannuation balance under the TRR strategy is $599,915 while the superannuation balance without using a TRR strategy is $546,334, a difference of $53,580.

So, under this example, the retiree has improved (or clawed back) their super balance by more than $10,000 a year.