Happy 55th birthday!

For more years than I would like to remember, turning 55 and superannuation have been inextricably linked. You can’t have one without the other.

You see, most superannuation benefits are preserved. This simply means we can’t actually access our super until we meet what is referred to as a condition of release.

Perhaps the most common condition of release is “retirement, on or after reaching preservation age”.

Preservation age has historically been 55. But, on 1 July, 2015, all of this changes.

Back in the later part of the 20th century, the superannuation laws relating to preservation age were changed. As the change was not going to apply until many years into the future, nobody really gave it much thought.

How time flies. A person turning 55 on 1 July, 2015, or at any time up until 30 June, 2016, will no longer be able to access their super from age 55. Their preservation age becomes 56.

The legislation that governs superannuation prescribes a change to the age at which superannuation can be accessed and it is all referenced back to our date of birth. The following table sets out the preservation age for people born after 30 June 1960.

Date of birth Preservation Age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
After 30 June 1964 60

We haven’t actually given this subtle change much thought, nor have we really considered the consequences. How easily “retirement on or after turning 55” rolls off the tongue.

So, not only is the preservation age being pushed out by a year or more for those born after 30 June, 1960, but preservation age affects a number of other superannuation related strategies. These include the ability to commence a superannuation pension under transition to retirement rules and the rates of tax that apply to superannuation benefits paid to people under 60 years of age.

Superannuation has just become a little bit more complex.

Anyone born after 30 June, 1960, who had ambitions of retiring once they turned 55, may just have to defer it for a couple of years, depending on when they were born.

Of course, the option will still be there to retire at age 55, or even earlier, however, you will need to have accumulated savings outside of super, which can be used to provide an income until such time as you are able to access your super.

I guess the next question is, will preservation age be increased even further in the future?

While there are no proposals in the pipeline at present, extending the preservation age does get airplay from time to time. With the age pension age already being increased to 67, I think further changes to the preservation age are inevitable.

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