Limitations, Exceptions and Taxations

For members from 60 years and above.

  • The amounts are cumulative-if you receive tax free R100 000-00 from retirement annuity,the tax free amount from any other fund is limited to R200 000-00
  • Cannot withdraw more than 1/3rd of benefits from pension including annuity
  • Remaining 2/3rd must be used to purchase annuity 
  • If proceeds from pension(including annuity) are less than R75 000-00,you may withdrawthe entire amount as lump sum as it would not be cost effective to purchase an annuity with such a low amount
  • Any amount you contribute to pension fund(including annuity) on which tax deduction is disallowed may be added to the tax free lump sum

Taxable Income Of Lump Sum Retiremnent Benefit Rate Of Tax
R0 – R 300 000 0%
R 300 001 – R 600 000 18% of amount above R300 000
R 600 001 - R 900 000 R 54 000 plus 27% of the amount above R 600 000
R 900 001 R 135 000 plus 36% of the amount above R 900 000

 

Consideration

  • Take first tax free R300 000 to settle debt or invest to supplement pension
  • Instead of withdrawing maximum lump sum consider buying a living annuity to earn a return on the tax free amount and pay marginal tax as and when you withdraw pension

Members  younger than 60 years

Members younger than 60 should take note that they stand to loose a lot of money should they wish to withdraw their benefits, transferring to a Preservation Provident Fund becomes a better option. However members from 55 can as well opt to withdraw a third and buy an annuity with their two thirds.

Taxable Income Of Lump Sum Retiremnent Benefit Rate Of Tax
0 - R 22 500 0%
R22 501-R 600 000 18% of the amount above R 22 500
R 600 001-R 900 000 R 103 950 plus 27% of the amount above R 600 000
R 900 000 and above R 184 950 plus 36% of the amount above R 900 000

 

Consideration

Instead of withdrawing a lump sum consider transferring your benefits to another pension fund or purchasing a retirement annuity to earn a return on the tax free amount and pay marginal tax as and when you withdraw pension

Taxation

  • As of 1st of August 2010 all employers are obliged to register everyone on their payroll with SARS
  • MCPF and all pension funds are SARS agents
  • Before any claim from the pension fund can be settled a tax directive from
    SARS     is required
  • All Councillors  are required to  submit their annual tax returns to SARS