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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 an Actuary working at a major financial services firm. He has experience in the valuation, design and distribution of wealth and investment products. Benjamin is insatiably passionate about teaching and empowering minds. All views expressed are Benjamin's own and neither reflect nor are influenced by the views of affiliated companies.

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