In order for a member to be eligible to commence an account based pension within their superannuation fund, a condition of release must be satisfied. Under Superannuation Industry (Supervision) Regulations 1994 – Schedule 1, the following condition of releases are available for a member:
- Reaching preservation age and retiring
- Ceasing an employment arrangement on or after the age of 60
- Reaching 65 years of age (even if the member is not retired)
- Terminal Medical Condition
- Permanent Incapacity
In today’s article, we are going to focus on understanding what ‘retirement’ specifically means when applying it to the above condition of releases (particularly, when a member reaches preservation age and retires and when an employment arrangement is ceased on or after the age of 60).
Regulation 6.01 of the SIS Regulations defines “gainfully employed” to mean “employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.”
The same regulation defines full time to mean gainful employment as “at least 30 hours each week” and part-time to mean gainful employment as “at least 10 hours, and less than 30 hours, each week.”
Retirement for superannuation, which is included in SIS sub-regulation 6.01(7), defines it as:
If Under 60
…the retirement of a person is taken to occur:
(a) in the case of a person who has reached a preservation age that is less than 60 – if:
(i) an arrangement under which the member was gainfully employed has come to an end; and
(ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis; or
If Over 60
(b) in the case of a person who has attained the age of 60 – an arrangement under which the member was gainfully employed has come to an end, and either of the following circumstances apply:
- i) the person attained that age on or before the ending of the employment; or
(ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis.
What does this mean?
If Under 60
If a member is aged between 55 and 59, “retirement” is satisfied when employment is ceased, in addition to the member never intending to work again on either a full-time or part-time basis (i.e. less than 10 hours a week).
If Over 60
If a member is aged 60 and over, “retirement” is satisfied when employment is ceased. In this case the intention to return to the workforce is irrelevant.
Frequently Asked Questions
Q – What is preservation Age?
A – A person’s preservation age ranges from 55 to 60, depending on their date of birth. Preservation is a restriction that prevents a member from accessing superannuation benefits until retirement or until satisfying a condition of release.
The below table summarises when preservation can be accessed.
|Date of Birth||Preservation Age||Reaches Preservation Age|
|Before 1 July 1960||55||Before 1 July 2015|
|1 July 1960 – 30 June 1961||56||1 July 2016 to 30 June 2017|
|1 July 1961 – 30 June 1962||57||1 July 2018 to 30 June 2019|
|1 July 1962 – 30 June 1963||58||1 July 2020 to 30 June 2021|
|1 July 1963 – 30 June 1964||59||1 July 2022 to 30 June 2023|
|After 30 June 1964||60||From 1 July 2024|
Q – Can a Member return to work after retiring?
A – If the member is under 60 years of age, and commences an account based pension, they must at that point in time have no intention to return to the workforce. However, there is no law that prevents the member from returning to the workforce.
If the member wished to commence a secondary account based pension as was still under 60 years of age at the time, they would need to be considered retired with no intention of returning at the time the pension was commenced.
If the member was over 60, they would just need to be retired, no intention would need to be documented.
Q – What is a member has 2 employment arrangements, can they leave one to be considered retired?
A – If the member was over the age of 60, the member would be considered retired. This is because when a member is over 60, they do not need to document the intention to return to the workforce, the law just requires an employment arrangement to cease.
If the member is under 60, they will not satisfy the definition of retirement by ceasing one employment agreement.
Q – What documentation is required to support a member’s retirement?
A – Where a member is deemed ‘retired’ it is our recommendation a retirement declaration is signed to support member’s retirement and document the decision.
We suggest including the following narrations within your retirement declaration:
Please be advised that I am currently 55 years of age or more, and have ceased gainful employment (including self-employment). I do not intend to ever take up gainful employment for ten or more hours per week.
I have therefore reached my preservation age and have met the condition of release allowing my superannuation benefits to be classified as unrestricted non-preserved.
Please be advised that I am currently 60 years of age or more, and an arrangement under which I was gainfully employed ceased.
I have therefore now met a condition of release allowing my superannuation benefits to be classified as unrestricted none preserved.
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