Retirement lump sum tax explained
Lump sums from retirement funds are taxed on two special tables: a generous one at retirement and a much stricter one when you cash out early.
Two tables, two very different results
When you retire, are retrenched or a member dies, a lump sum is taxed on the retirement table. The first R 550 000 is tax-free in 2026/27, and the rates then rise from 18% to 36%. When you resign and take your fund in cash before retirement, the withdrawal table applies, and only the first R 27 500 is tax-free.
An example
A lump sum of R 600 000 at retirement is taxed at 18% on the R 50 000 above R 550 000: R 9 000. The same R 600 000 taken as a withdrawal when you resign is taxed at 18% on the R 572 500 above R 27 500: R 103 050. Preserving the money until retirement keeps the bigger tax-free amount available.
Earlier lump sums count
Both tables are cumulative over your lifetime. Every earlier taxable lump sum is added first and uses up the lower brackets, so someone who took a R 300 000 withdrawal years ago has only R 250 000 of the R 550 000 left at retirement. Your fund asks SARS for a tax directive, which uses these totals.
The two-pot system
Since 1 September 2024, new contributions are split between a savings pot, which you can withdraw from once a tax year, and a retirement pot, which you can only take at retirement. Savings-pot withdrawals are taxed at your marginal rate as income, not on the lump sum tables. Money saved before September 2024 sits in a vested pot that still follows the old rules.
How much can be taken as cash
At retirement you can usually take up to a third of your retirement savings in cash and must use the rest to buy an annuity. If the total is small, R 360 000 or less from 1 March 2026, you may take all of it in cash.
Work out your own figure with the retirement lump sum tax calculator.
Lump sum tables for 2026/27 from the Budget 2026 Tax Guide. De minimis amount of R 360 000 from 1 March 2026 (Sanlam). Checked 18 October 2026. General information, not tax advice.