Retire: The new retirement laws explained

In Latest, Retire by Carina Jooste

Just over seven years ago, Pravin Gordhan, the then-minister of finance, tabled a proposal aimed at the governance, preservation and annuitisation of retirement funds. This formed part of harmonising the tax treatment of the different kinds of retirement funds. Collectively, these proposals are known as the T-Day reforms. This proposal is coming to fruition on 1 March 2021, after President Ramaphosa signed the Taxation Law Amendment Act of 2020 into law on 20 January 2021. 

The media labels T-day as a big turning point for South African retirement funds. So what are we turning towards?

Broadly speaking, the changes relate to

a.) the annuitisation of retirement funds, and

b.) access to your pension preservation fund or retirement annuity prior to retirement upon financial emigration from South Africa.

Annuitisation of retirement funds

The new annuitisation rules apply to the non-vested benefits of all pre-retirement funds going forward, and were created to prevent retirees from outliving their retirement savings.

What’s different?

An individual, prior to T-Day, could get access to their provident fund before retirement when they leave their employer. The new rule stipulates that individuals under the age of 55 can now only withdraw one-third of the value of their retirement fund as a lump sum before retirement. The balance must be converted into an annuity. However, the new legislation still protects the right to accrued benefits of provident fund and provident preservation fund members as at T-day.

For over 55s, not much has changed. You will still have access to the money in the fund in cash on retirement from that fund. However, when you transfer to another approved fund, all new contributions, fund credits and growth in the new fund will be non-vested benefits subject to annuitisation.

A quick glance at the details

As we said earlier, the annuitisation rule of provident and provident preservation funds only applies to non-vested benefits. So what are vested benefits? 

If you’re under 55 on T-Day, your vested benefits include all contributions made to your provident fund, or transfers made to a provident preservation fund prior to T-Day. It also includes fund returns and future growth on the above amounts. You will therefore still be permitted to take amounts which accrued before T-Day as a lump sum.

Contributions made to your provident fund post-T-Day, plus any fund return or credits after T-day, will be deemed as non-vested and subject to the annuitisation rules upon retirement. 

Exception alert: Non-vested benefits only need to be converted into an annuity if the value exceeds R247,500.

In a nutshell, the same annuitisation rules apply to members of pension funds, pension preservation funds, retirement annuity funds, provident funds and provident preservation funds.

Financial emigration

What’s different?

Prior to T-Day, members of retirement funds could access their preservation or retirement annuity fund when they successfully apply for formal exchange control emigration (i.e. financial emigration).  After 1 March 2021, members can only withdraw from their retirement funds if they can prove they ceased to be a South African tax resident, and have remained tax non-resident for at least three consecutive years.

The proposed rules are only applicable to preservation funds and retirement annuities (RAs), not to current membership of a pension fund or provident fund.

Exception alert: Should individuals submit their exchange control emigration application before 28 February 2021, and it’s approved before 28 February 2022, they would be able to access their retirement funds.


Saving for retirement is the biggest investment most of us will ever make. Sadly, it can also be very complicated. In this monthly blog, we try to answer some of the retirement questions we hear most often, ranging from which products are best suited to different circumstances to efficient tax treatments. Words by Carina Jooste.


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