Retirement Annuity

How will I be taxed if I withdraw my pension fund?

Question

If I encash my pension fund, will I be taxed according to the PAYE tax rate or not?

Answer

You can only encash your pension fund if you withdraw (as opposed to retiring) from your fund. If you retire, you can only encash up to one-third, with the balance you must purchase an annuity. If you withdraw (eg on changing jobs) you can encash the full amount, but the tax you pay on the cash lump sum will be more than if you retire from the fund (earliest age 55).

If you withdraw, the first R22 500 is not taxed. The balance up to R600 000 is taxed at 18%, the balance up to R900 000 at 27%, and the remainder at 36%. The effective tax rate you pay on a cash lump sum is lower than if the PAYE tax rates were applied.

How can we 10X Your Future?

Begin your journey to a secure future with 10X Investments. Explore our range of retirement products designed to help you grow your wealth and achieve financial success.