I’m a wee bit confused by some terminology, and would love a simple-to-understand explanation. What is the transfer balance cap? What is the difference between accumulation and pension? What is meant by transition to retirement as it pertains to super?

Some of the superannuation terminology is confusing. Credit: Louie Douvis

Great questions. I’m sure you’re not alone in being puzzled by some of this terminology.

The transfer balance cap is the maximum amount of superannuation savings that can be put into a tax-free pension. Super exists to provide us with income when we retire. While we are working and contributing to our superannuation savings, they are in the accumulation phase. When we retire and need to start drawing money out of our superannuation, we convert it into the pension phase.

At this point of conversion from accumulation to pension, an assessment is made against your transfer balance cap. The current transfer balance cap limit is $2,000,000. If........

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