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How your retirement fund is taxed


How your retirement fund is taxed

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Firstly please note: this is not the same tax rate you would be subjected to if you withdrew your retirement fund as a result of leaving your current employer (due to retrenchment, termination of employment, moving jobs/location etc).  

 This post addresses retirement lump-sum tax; i.e. tax on withdrawal of your retirement fund (should you choose to withdraw a portion of it) upon retirementOn retirement, South African law allows you to withdraw up to a third of your retirement savings as one cash payout  a lump sum. This post considers the way that SARS charges tax on the portion you choose to withdraw in cash. Check out the latest table below (for 2017):

Retirement Fund Value (in Rands)

Rates of tax on the fund

0 – 500 000



500 001 – 700 000


18% of taxable income above R500 000

700 001 – 1 050 000

36 000 + 27% of taxable income above R700 000


1 050 001 and above


130 500 + 36% of taxable income above R1 050 000


Say you decide to withdraw R1 500 000 upon retirement. You’d fall in the last block of the above table, therefore you would pay:

R 130 500 + 36% * (1500 000 – 1 050 000)

= R 292 500



Benjamin is a corporate actuary, currently working at a major financial services firm. He has experience in wealth and investment products. Benjamin is very passionate about teaching and empowering minds.

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