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We’re all aware of the importance of retirement planning and ensuring you have enough money to maintain your standard of living after you retire. One of the most critical aspects of retirement planning is understanding how the tax on your retirement savings will work.
Let’s start with the retirement lump sum withdrawal tax table. This becomes applicable once you withdraw lump sum amounts from your retirement savings.
The table below indicates the tax payable for withdrawals after you’ve reached retirement age for the 2025 tax year ending on 28 February 2025.
| Lump sum | Rate of tax (R) |
| 0 – 550 000 | 0% of taxable income |
| 550 001 – 770 000 | 18% of taxable income above 550 000 |
| 770 001 – 1 155 000 | 39 600 + 27% of taxable income above 770 000 |
| 1 155 001 and above | 143 550 + 36% of taxable income above 1 155 000 |
For withdrawals before retirement, the table below applies for the 2025 tax year ending on 28 February 2025.
| Lump sum | Rate of tax (R) |
| 0 – 27 500 | 0% of taxable income |
| 27 501 – 726 000 | 18% of taxable income above 27 500 |
| 726 001 – 1 089 000 | 125 730 + 27% of taxable income above 726 000 |
| 1 089 001 and above | 223 740 + 36% of taxable income above 1 089 000 |
The lump sum is a lifetime aggregate and isn’t determined on a per withdrawal/payout basis. This means the tax payable is based on the overall lump sum. So, if you’ve made a previous withdrawal, it gets added to any future withdrawals when determining the tax payable.
Retirement planning considerations
- To gain access to money from your retirement savings before reaching retirement age under the two-pot system, you will need to check the rules of the specific fund you have invested with, which is subject to tax upon liquidation of the funds.
- A well-defined, comprehensive retirement plan includes sufficient discretionary savings to supplement compulsory savings (retirement funds and compulsory annuities) to ensure flexibility and balance.
- Consider local and offshore sinking funds or endowment structures and local tax-free savings accounts (TFSA) to supplement retirement savings adequately and tax efficiently. These products provide tax relief without limitation on the underlying assets and are accessible before retirement age. This would be essential when planning for your retirement, especially if you want to retire early.
- Consider a goals-based approach when planning for specific capital needs at retirement from an asset allocation and product structuring perspective. This will help ensure your retirement plan will meet your retirement goals.
Tax Tuesday
Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.
