Provided the trust deed of your super fund permits it, you can commence a retirement income stream at any time after you reach your preservation age, regardless of whether you are working or not.  Removal of the requirement that you be retired before commencing a pension was removed in 2005.

Preservation ages are based on your date of birth, and are shown in the following table:

The only catch is that until you meet another condition of release (for example being retired) you will be unable to commute that pension as a lump sum.  Transition to retirement pensions must be taken as pensions.  In all other respects they are treated the same as pensions for fully retired people.

A common strategy which came into use at the time of Transition to Retirement  pensions being introduced was to salary sacrifice salary into superannuation while simultaneously taking a pension.  This generally results in substantial savings of income tax.

Rolling a super fund over to pension mode is not necessarily a capital gains tax event, however many super funds do not offer a pension option in the same fund, so you must rollover to an external fund.  Rolling over to an external fund is generally a capital gains tax event.

To avoid capital gains tax on rolling from accumulation mode to pension mode, make sure you choose your fund wisely in advance.  Self managed super funds and many of the better master trusts allow CGT-free rollover to pensions.  Many retail funds and industry funds however do not offer this, which is one of the arguments that financial advisors use (and its a perfectly good argument) for using master trusts rather than industry funds.

Being able to avoid capital gains tax means that the entire accrued capital gain on all assets in your portfolio can be realised tax free once the fund goes into pension mode.