Once you reach your preservation age you may choose to either commence a transition to retirement income stream (TRIS) or if you are retired you can commence an account based pension. The main difference is that the TRIS pays benefits before retirement whilst a pension pays benefits after retirement.
Transition to retirement income stream (pre-retirement):
Transition to Retirement allows a member who has reached their preservation age to access their superannuation benefits through an income stream even whilst they are still working. With a TRIS you may be able to reduce your working hours without reducing your income. This can be done by topping up your part-time income with a regular ‘income stream’ from your SMSF. Once a member commences a TRIS they will have 2 accounts within their SMSF. One being their income stream account and the second being an accumulation account accepting future contributions.
Account based pension (post-retirement):
An account based pension is a way of receiving your superannuation benefits as an income stream after you have reached your preservation age and have permanently retired. Income within an account based pension is not taxed, regardless of the earnings being classed as income or capital gains. Account based pensions are very flexible as they allow the member to choose how much income is received each year, as long as it is satisfies the minimum withdrawal limit. A member also has the flexibility to withdraw lump sum amounts from their account in addition to the pension amount.