Withdrawal benefits are paid to workers who leave work either through dismissal or resignation before they’re due to retire. Usually, if a worker resigns and withdraws from a pension fund, they’re entitled to a payout of both employer and employee contributions made to the fund during the full term of their service, plus investment growth on those contributions. The worker in some cases might not get the employer’s contribution to the fund, or only a portion thereof depending on the fund rules.
At withdrawal, current legislation allows for full access to the funds, but the worker will be taxed as per below:
|Retirement fund lump sum withdrawal benefits|
|Taxable income (R)||Rate of tax (R)|
|0 – 25 000||0% of taxable income|
|25 001 – 660 000||18% of taxable income above 25 000|
|660 001 – 990 000||114 300 + 27% of taxable income above 660 000|
|990 001 and above||203 400 + 36% of taxable income above 990 000|
When can I retire from a retirement fund?
You can’t retire before the age of 55 except if:
- You’re permanently disabled
- You emigrate (T&Cs apply)
- Your investment value across all your investments in the fund is less than R7 000.
In our next article we will look at when taking retirement and the tax implications for your retirement funds.