Superannuation is not accessible early, except in extreme circumstances such as total and permanent disablement or severe financial hardship. However from age sixty, people are allowed limited access to their superannuation accounts while they are still working.

They can convert their super to a pre-retirement pension and receive pension payments of up to ten per cent of the balance annually. This can be very helpful to some people.

Workers with high incomes and little debt may have no use for extra income from their super. However pre-retirement pensions can be used for various purposes such as enabling people without surplus income to grow their super balances faster.

A ‘transition-to-retirement’ strategy involves a person starting a pre-retirement pension and using the income from it to meet part of their living expenses. They can then sacrifice more of their salary into super each payday.

Drawing an income from super while putting extra money back into super may seem strange. However there is a very significant gain available to people in the second and higher tax brackets – large tax savings.

The pension payments paid from the pre-retirement pension account are tax free. Salary taken as cash to pay living expenses is taxed at personal marginal rates. The rate for those earning over $45,000 up to $135,000 per annum is 32 per cent including Medicare Levy.

The tax on income sacrificed into superannuation instead is only 15 per cent. That’s a saving of 17 per cent on each dollar sacrificed into super instead of taken in cash. Having the pre-retirement pension income allows this.

The limit on tax-deductible super contributions for each person is $30,000, which includes employer contributions. So they can sacrifice up to the difference between $30,000 and their employer’s contributions for them.

People whose total super balance was under $500,000 at the last June 30 can also do catchup contributions. They can make contributions they were entitled to put in in the last five years but didn’t. This area needs specialist advice.

Pre-retirement pension income can also be used for other purposes. The maximum 10 per cent pension can be paid as a regular payment, or as a one-off immediate lump sum.

People over sixty who still have a mortgage or other debts can use the pension income to pay them off. The income can also be used to buy investments or fund a business. Pension payments can be used to service an investment loan to buy a property or shares.

Each person’s circumstances are different so advice and a personalised plan are best to maximise benefits.