How to increase retirement savings without reducing your take-home pay

3 min read

People nearing retirement may be considering a range of options to help them increase their savings and superannuation.

While voluntary contributions to superannuation are a common way to increase retirement savings; for some, the corresponding reduction to take-home pay can be challenging but there may be an alternative.

The transition to retirement (TTR) income swap strategy may be an option for certain people who have reached their preservation age. Preservation age is the age at which you can start accessing your superannuation benefits.

Date of birth 

Preservation age (years) 

Before 1 July 1960 


1 July 1960 - 30 June 1961 


1 July 1961 - 30 June 1962 


1 July 1962 - 30 June 1963 


1 July 1963 - 30 June 1964 


After 30 June 1964 


Source: Australian Taxation Office

What is a TTR income swap strategy?

A person using a TTR income swap strategy simultaneously draws a TTR account based pension while making voluntary concessional superannuation contributions. Concessional superannuation contributions are those made from your before-tax salary and are capped at $25,000 per financial year for the 2018/19 financial year. This includes any contributions your employer might make on your behalf or those you might claim a tax deduction on. 

Voluntary concessional contributions made by either:

  • Setting up a salary sacrifice arrangement with an employer. This means the employer contributes part of the employee’s before-tax salary into their superannuation.
  • Making a personal contribution within the caps and claiming a tax deduction on these.

Commencing a TTR account based pension

  • Moving funds currently in superannuation from the accumulation phase into the pension phase. The person might then draw pension payments between 4-10% each financial year. The 10% maximum applies until the person can satisfy a condition of release (either turning 65 years or fully retiring after reaching preservation age).

For some, this may be a tax-effective option as voluntary contributions are taxed at 15%, compared to the marginal tax rate (which can be lower or higher than this depending on an individual’s circumstances) and income payments from the TTR pension may be tax-free if the account holder is aged 60 or above. Tax on income payments may apply for those aged between their preservation age and age 60, with the amount of tax charged at marginal tax rates, based on the taxable portion of the pension, with a 15% offset.

Taking a closer look

This fictional example shows how one instance of the TTR income swap strategy could work.

Julia is 62 years old, works 40 hours per week earning $80,000 pa and has $200,000 in her superannuation. Her Superannuation Guarantee payments from her employer are $7,600 a financial year.

She considers a TTR income swap strategy as follows:

  1. Salary sacrifice $669.23 per fortnight ($17,400 per year). This would bring her total concessional contributions up to the cap of $25,000.
  2. Commence a TTR account based pension, from her superannuation, of $436 per fortnight ($11,336 per year) which is between the 4-10% limit of what she is able to access each year.

How this might look compared to her current situation is as follows, based on 2018/19 tax rates (which may change in the future): 


With TTR income swap strategy 




Salary sacrifice 



TTR pension payments 



Income tax (including Medicare) 



Take home pay 



Net contributions to superannuation



Additional superannuation savings 



Source: Tax rates sourced from Australian Taxation Office. Calculations made by BT on the basis of these rates.

However, the outcome may be different if Julia was aged 57 instead. In that situation, she would not receive tax-free income payments from her TTR pension and would need to draw a pension payment of $14,158 to achieve the same salary outcome. This would reduce the retirement savings she could make to $632 instead of $3,454.

Things to consider

Individuals considering this approach may want to ask themselves the following:

  • Does your employer impose any conditions on salary sacrifice and could this impact your level of superannuation guarantee payments?
  • Is superannuation the right investment environment for your needs and circumstances, also factoring that you won’t be able to access most of your superannuation until you can satisfy a condition of release?
  • What tax outcomes would specifically apply to you if you use this approach and will they leave you better or worse off than the present situation? 

If a TTR income swap strategy isn’t the right approach for you, there are other strategies you could consider to manage your retirement savings and goals. Expert help can be valuable in navigating your options as you near retirement. 

Information current as at 1 June 2018. This information has been prepared by BT - Part of Westpac Banking Corporation ABN 33 007 457 141. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investment held in superannuation. The Government has set caps on the amount of money that you can add to superannuation each year on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps. For more detail, speak with a financial adviser or visit the ATO website. BT cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of superannuation can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser. This article may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.