Superannuation is a double-edged blade

SUPERANNUATION still remains a superb vehicle for saving tax but the price of growing your money in a low tax environment is loss of access to it until you reach "preservation age".

For people aged 32 or more at 1 July 1992 the preservation age is 55, but it is being slowly increased with the aim of having all benefits preserved until age 60 by the year 2025.

You can access your superannuation as a lump sum once you reach 55 if you "retire". Retirement however, is a state of mind, so it is possible for people to retire at 55, draw part of their superannuation and then return to the workforce a few months later because they are sick of doing nothing.

You can access your superannuation when you reach 60 if you retire from any job - it needn't be your main job. At age 65, access is automatic.

In 2006, as part of a total reform of the superannuation system, the access rules were relaxed so that anybody who wanted to continue working after their preservation age was able to take part of their superannuation as an income stream.   This income stream - the transition to retirement pension (TTR) - is similar to a normal account-based pension except non-commutable. That's a fancy term that means you can't make lump sum withdrawals from it. 

TTRs have become extremely popular, and most eligible workers are now boosting their retirement nest egg by salary sacrificing a portion of their salary to super and using the transition to retirement pension to fund any shortfall in their living expenses.  TTRs have some limitations until you reach 60 as, prior to that age, withdrawals from the taxable components are taxed at your marginal rate less a 15% rebate. It's a no-brainer once you reach 60, as the contributions lose just 15% in entry tax, while the withdrawals are tax free.

A knowledge of the access rules is essential for anybody making long term investment plans. Put simply, the younger you are the more you should opt to invest outside of the superannuation system, the older you are the more you should favour it.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: