Retirement benefits

Taxation of the cash retirement lump sum payment 

Any amount of your retirement benefit that you take in cash is subject to tax. The Tax-Exempt (tax-free) portion is:


Up to R500 000 (plus such portion of your AIPF transfer value that was subjected to a zero tax rate) of the retirement benefit will be exempt from tax.

This tax exempt amount of R500 000 will be reduced by any tax-exempt amounts that you have received previously on withdrawal from a Pension or Provident fund.  Any contributions that you have made that were not previously tax-exempt will also be taken into account and will be added to the R500 000, thus increasing the tax-free portion of R500 000.

If a member has previously received lump sum cash payments from a Retirement Fund, these amounts will be taken into account (at the tax rates applicable at retirement) thereby reducing the R500 000 tax- exempt portion.  

Taxable Amount  Rate of Tax 
 R0 to R500 000 0% 
From R500 001 to R700 000 R0 plus 18% of taxable income exceeding R500 000 
From R700 001 but not exceeding R1 050 000 R36 000 plus 27% of taxable income exceeding R700 000
Exceeding R1 050 001 R130 500 plus 36% of taxable income exceeding R1 050 000

Any amount of the retirement benefit that is taken in cash and that exceeds the limits stated above will be taxed as follows:  

NOTES: 

  1. The same tax-table applies to a retirement from a Retirement Annuity Fund.
  2. Benefits paid on retrenchment are taxed on the same basis as the retirement benefit.

Taxation of your pension benefit for both Life Annuitants and Living Annuitants 

You will pay income tax in the usual way on the monthly pension you receive. Income tax (PAYE) will be calculated and deducted each month, when paying you the pension. It is important to note that, if you have income from more than one source (e.g. pensions arising from two different retirement funds), you may have to pay extra tax when you are assessed by SARS – this is because SARS will combine the two incomes when calculating how much tax you owe.