How much tax will I pay on my retirement lump sum withdrawals?

From age 55, you can take up to one-third of your retirement fund (Retirement Annuity, Company Pension Fund or Preservation Fund) as a cash lump sum.
The first R550,000 of your retirement lump sum is tax-free (as of 1 March 2024).
Any previous withdrawals or retirement lump sums you’ve taken will reduce your tax-free amount.
The remaining amount above R550,000 is taxed according to the SARS retirement lump sum tax tables.

PS. If you are resigning from your job, the tax implications are different. See here

Here are the steps and a calculator to help you calculate the tax implications of retiring from your Retirement Fund.

LUMP SUM TAX CALCULATOR: What are your tax implications when retiring from your Retirement Fund? (2024/25)

Step 1. Enter the amounts in your Retirement Fund

Savings Pot

Get the Rand amount from your Retirement fund provider

Step 2. Enter the amount you want to withdraw

Remember, you can withdraw up to 1/3 of your retirement fund's value. That is, R1,666,666. The other 2/3 can be used to buy an annuity.

Withdrawal Amount

Maximum withdrawal amount is R1,666,666

Step 3. Have you taken any previous benefits?

Results

Lump sum amount after tax: R 0

1
Calculate the maximum withdrawal amount
The maximum withdrawal amount is 1/3 of your retirement fund's value. That is, R1,666,666. You are looking to withdraw R1,500,000.
2
Add any previous lump sum withdrawals to your own withdrawal amount
R1,500,000 + R = R1,500,000
3
Calculate tax on retirement lump sum using the SARS Lump Sum Tax Table
The tax on your retirement lump sum is calculated using the SARS retirement lump sum tax table. Your total lump sum is R.
Amount Tax
R1 - R550,000 0%
R550,001 - R770,000 18% of amount above R550,000
R770,001 - R1,155,000 R39,600 + 27% of amount above R770,000
R1,155,001 and above R143,550 + 36% of amount above R1,155,000
Your tax calculation: The amount of tax payable on your retirement lump sum is R. Your after-tax amount is R.

Amount	Tax
R1 - R550,000	0%
R550,001 - R770,000	18% of amount above R550,000
R770,001 - R1,155,000	R39,600 + 27% of amount above R770,000
R1,155,001 and above	R143,550 + 36% of amount above R1,155,000

FAQ

What happens to previous withdrawals? Any withdrawals you’ve made since March 2009, retirement lump sums since October 2007, and retrenchment benefits since March 2011 will reduce your tax-free amount.

How is the remaining two-thirds taxed? The remaining portion must be used to purchase an annuity. The monthly income from this annuity will be taxed at your marginal tax rate.

Sources: