We break down the key distinctions between super accumulation (where your money grows) and retirement phase (where you draw tax-free income), including how contribution rules, investment strategies, and tax treatments change between the two.

Super is the cornerstone of retirement planning for many Australians, but navigating its phases – and the rules that apply – can be confusing.

Whether your super is still growing (accumulation phase), or you’re starting to use it (retirement phase), it’s worth checking whether your super is setup correctly for your current needs as it can affect your tax obligations and income in retirement.

Let’s break it down.

What Are the Accumulation and Retirement Phases?

Super is designed to support you through two key life stages: growing your savings while you’re working and providing a regular income when you’re enjoying retirement. These stages - known as the accumulation phase and the retirement phase - can overlap. You don’t have to be fully in one or the other; it’s possible to hold both accumulation and retirement accounts at the same time, depending on your financial journey.

1. Accumulation Phase

This is the phase most people are in during their working lives. You and your employer make contributions to your super fund, which are invested to grow your retirement savings.

• Tax: Investment earnings are taxed at 15% in this phase.¹
• Access: Funds are generally locked away until you reach preservation age (usually 60), retire, or meet another condition of release.
• Contributions: You can make both concessional (before-tax) and non-concessional (after-tax) contributions.
• Growth potential: Your super balance grows through contributions and investment returns.

This accumulation phase is all about building your retirement savings, however, it doesn’t offer the same tax advantages as the retirement phase.

2. Retirement Phase

Begins when you retire (typically after turning 60) and start drawing a regular income stream from your super, often through a retirement pension.

• Tax-free investment earnings: Once your super moves into the retirement phase, earnings (such as interest, dividends, and capital gains) are generally tax-free.
• No tax on withdrawals: If you’re aged 60 or over, any income you draw from your pension account is also tax-free as well as lump sum withdrawals.
• Minimum withdrawal rules: You must receive a minimum percentage of your pension balance each year as pension payments, based on your age.

This phase is designed to provide a steady income stream in retirement while maximising your tax benefits. Contributions can continue to be made to an accumulation account if certain rules are met.

Accumulation vs. Retirement Phase: What’s the Difference?

Transition to Retirement (TTR)

Working Less, Living More: What Transition to Retirement Really Means

If you’ve reached age 60 but aren’t ready to fully retire, you might consider a Transition to Retirement (TTR) strategy. This allows you to start drawing a non-commutable pension from your super while still working.

Benefits of TTR:

• Supplement your income with pension payments if you reduce work hours.
• Potential tax savings, especially if you make salary sacrifice contributions into super.

However, earnings on TTR pensions remain taxed at 15% until you meet a condition of release such as ceasing employment after reaching preservation age or attaining age 65.

When Should You Move to the Retirement Phase?

There’s no one-size-fits-all answer. While many people plan to retire around age 65.5, the reality is often different—the average age Australians leave the workforce is 56.3. But unplanned events like illness, injury, or redundancy can force people to retire earlier than expected.²

Most people consider switching to the retirement phase when:

• They are over 60 and have retired (or met another condition of release).
• They want to take advantage of tax-free investment earnings and withdrawals.
• Their retirement savings are sufficient to support their income needs.

It’s important to review your financial goals, lifestyle needs, and eligibility before making the switch. Remember, you can only transfer up to the Transfer Balance Cap (currently at $2 million) into the retirement phase; amounts above this stay in the accumulation phase and are taxed accordingly.

Whether retirement is planned or unexpected, understanding your options can help you feel more confident about the road ahead.

Things to Consider Before Making the Switch

Super rules and thresholds change on an ongoing basis - like increases in the Transfer Balance Cap. These can impact how much you can save and how much you can move into the tax-free retirement phase. Knowing these updates helps you decide the right time to switch phases and maximise your retirement benefits.

Contribution Limits:

The concessional (pre-tax) contributions cap remains at $30,000, and the non-concessional (after-tax) cap is $120,000. Be mindful of these limits, especially if making extra contributions or salary sacrificing.

Bring-Forward Rule:

If you’re under 75, you may be able to contribute up to three years’ worth of non-concessional contributions in one go, subject to your total super balance.

Investment Strategy:

Your risk tolerance and income needs may change as you approach or enter retirement. Review your investment options to ensure they suit your new phase of life.

Transfer Balance Cap:

The maximum amount you can transfer to a tax-free retirement phase account has now risen to $2 million (up from $1.9 million). This allows eligible retirees to move more of their super into the tax-free retirement phase. If you exceed this cap, you must remove the excess from the retirement phase. The excess can remain in the accumulation phase of super and the earnings will be taxed at 15% or you can withdraw this amount.

Next Steps

• Check your current phase: Are you still building your super, or are you ready to start drawing an income?
• Review your options: Consider your age, work status, and financial goals.
• Seek advice: For tailored strategies, speak with a financial adviser or your super fund.

Your risk tolerance and income needs may change in retirement, so reviewing your investment mix is also key. You might consider speaking with a financial adviser to ensure your super strategy aligns with your goals.

Let’s get in touch

Getting expert help is all part of being with ANZ Smart Choice. As a service to our members, our team of Financial Coaches* provide general advice related to your super, at no additional cost.

If you are a member with us, book your appointment with a Financial Coach today.

¹ Before tax contributions are generally taxed at 15%, unless you:
- earn more than $250,000 p.a.
- haven’t given your TFN to your super fund
- go over the concessional contributions cap
In the above situations, extra taxes may apply.
² Australian Bureau of Statistics 2023. Data covers 2020-2021.

* The Financial Coaches, Super Advisers, Education Managers and Client Relationship Managers provide financial advice under the Australian Financial Services licence (AFSL) of, Actuate Alliance Services Pty Ltd ABN 40 083 233 925 AFSL 240 959 (Actuate). OnePath Custodians Pty Limited (ABN 12 008 508 496, AFSL 238346) (OPC) is the trustee of Retirement Portfolio Service (ABN 61 808 189 263) (Fund). Actuate and OPC are both part of the Insignia Financial group of companies, comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (Insignia Financial Group). OPC has an arrangement in place in which Actuate has been appointed to provide general and limited non-ongoing personal advice services (which includes simple super advice) to members of relevant products in the Fund. Simple super advice will not be provided on topics prohibited under relevant law. Neither OPC, nor any other entity within Insignia Financial Group, including any other entity within the Insignia Financial Group that is a trustee for a regulated superannuation fund, is liable for or responsible for any work, action or advice provided by Actuate. For important information about Actuate’s services which you should know before making a booking, please refer to Actuate’s Website Disclosure Information.