How much of my retirement lump sum is tax-free?

At retirement (age 55+), the first R550,000 is tax-free. This is a lifetime allowance — previous lump sums reduce the available tax-free portion. At resignation (pre-retirement), only R27,500 is tax-free.

What are the retirement lump sum tax rates?

At retirement: R0–R550,000 = 0%, R550,001–R770,000 = 18%, R770,001–R1,155,000 = 27%, above R1,155,000 = 36%. At resignation: R0–R27,500 = 0%, R27,501–R726,000 = 18%, R726,001–R1,089,000 = 27%, above R1,089,000 = 36%.

Should I take a lump sum or buy an annuity?

This depends on your needs. A lump sum gives immediate access but may be spent. An annuity provides guaranteed monthly income for life (life annuity) or flexible drawdown (living annuity). Many retirees take the tax-free portion (R550,000) and annuitize the remainder.

What is the difference between a pension fund, provident fund, and retirement annuity?

At retirement: pension funds allow up to 1/3 lump sum; provident funds (post-2021 members) align with pension rules; retirement annuities (RAs) allow up to 1/3 lump sum. All use the same lump sum tax table.

Retirement Lump Sum Tax Calculator

Calculate the tax on your SA retirement, resignation, or death benefit lump sum. Uses the official SARS lump sum tax table with lifetime aggregation rules.

⚡ Quick Calculator Get a fast estimate

Retirement Lump Sum Amount

Event Type

Previous Retirement Lump Sums Received

Prior lump sums reduce your tax-free threshold.

Net Lump Sum (After Tax)

R 714 000

Tax Payable

R 36 000

Tax-Free Portion

R 550 000

Effective Tax Rate

4.80%

Gross Lump Sum

R 750 000

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How Retirement Lump Sum Tax Works

SA retirement lump sums use a special tax table — separate from regular income tax brackets. At retirement (age 55+), the first R550,000 is tax-free. Above this, progressive rates of 18%, 27%, and 36% apply.

This is a lifetime allowance. If you previously took a retirement lump sum, that amount reduces your tax-free threshold. SARS tracks this via your tax number.

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Lump Sum Amount

Previous Lump Sums

Prior withdrawals reduce tax-free threshold

Net Payout After Tax

R 714 000

Tax Payable

R 36 000

Effective Rate

4.8%

Tax-Free Amount

R 550 000

Lump Sum Tax Brackets

Lump Sum	Tax	Net	Eff. Rate
R 200 000	R 0	R 200 000	0.0%
R 550 000	R 0	R 550 000	0.0%
R 770 000	R 39 600	R 730 400	5.1%
R 1 155 000	R 143 550	R 1 011 450	12.4%
R 2 000 000	R 447 750	R 1 552 250	22.4%

Retirement vs Resignation Tax Tables

Retirement (age 55+)

Lump Sum	Tax Rate
R0 – R550,000	0%
R550,001 – R770,000	18%
R770,001 – R1,155,000	27%
R1,155,001+	36%

Resignation / Pre-Retirement

Lump Sum	Tax Rate
R0 – R27,500	0%
R27,501 – R726,000	18%
R726,001 – R1,089,000	27%
R1,089,001+	36%

Worked Example

Retirement at 60: R900,000 lump sum, no previous lump sums

First R550,000: 0% = R0 tax

Next R220,000 (R770,000 – R550,000): 18% = R39,600

Remaining R130,000 (R900,000 – R770,000): 27% = R35,100

Total tax: R39,600 + R35,100 = R74,700

Net payout: R900,000 – R74,700 = R825,300

Effective rate: 74,700 ÷ 900,000 = 8.3%

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Retirement Lump Sum Portfolio

Lump Sum 1

Type

Amount

Tax Year

Lump Sum 2

Type

Amount

Tax Year

Remaining Fund Strategy

What to do with remaining retirement pot?

1/3 Lump Sum Rule (provident fund members before 2021)

Total Net Payout After All Taxes

R 752 300

Total Gross

R 800 000

Total Tax

R 47 700

Overall Rate

5.96%

Lump Sum Tax Breakdown

#	Type	Gross	Tax	Net	Rate	Cumulative
1	retirement	R 500 000	R 0	R 500 000	0.00%	R 500 000
2	retirement	R 300 000	R 47 700	R 252 300	15.90%	R 800 000
Total		R 800 000	R 47 700	R 752 300	5.96%

Retirement Tax Table Reference

Retirement/Death (age 55+)

Amount	Rate
R0 – R550,000	0%
R550,001 – R770,000	18%
R770,001 – R1,155,000	27%
R1,155,001+	36%

Resignation (pre-retirement)

Amount	Rate
R0 – R27,500	0%
R27,501 – R726,000	18%
R726,001 – R1,089,000	27%
R1,089,001+	36%

Frequently Asked Questions

At retirement (age 55+), the first R550,000 is tax-free as a lifetime allowance. At resignation (pre-retirement), only R27,500 is tax-free. Previous lump sums reduce the available tax-free portion.

Retirement: R0–R550,000 = 0%, R550,001–R770,000 = 18%, R770,001–R1,155,000 = 27%, above R1,155,000 = 36%. Resignation: R0–R27,500 = 0%, R27,501–R726,000 = 18%, R726,001–R1,089,000 = 27%, above R1,089,000 = 36%.

Yes. SARS tracks your lifetime retirement lump sums. If you previously received a R300,000 lump sum, your remaining tax-free amount is R550,000 – R300,000 = R250,000. This applies to all retirement funds combined.

A lump sum gives immediate access but may be spent. An annuity provides guaranteed monthly income (life annuity) or flexible drawdown (living annuity). Many retirees take the tax-free R550,000 and annuitize the rest for income security.

Yes. Instead of withdrawing when you resign, you can transfer your retirement fund to a preservation fund or retirement annuity. This defers taxation until retirement when the more favorable tax table (R550,000 tax-free) applies.