As you invest for your retirement, you also need think about those key trigger moments like resignation, retrenchment or emigration that can affect your plans. Our experts explain what you need to do to prepare for when “life happens”.

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Saving appropriately for your retirement is important. In most instances, these savings occur through compulsory contributions to your employer’s pension or provident fund. For the self-employed or the “take matters into my own hands” personalities, a retirement annuity may be the weapon of choice.

There are certain basics we should all bear in mind when saving for retirement. From a savings perspective, firstly, you should ensure that you save enough and invest in appropriate underlying investments to provide you with growth over the long term. Secondly, make sure to get a payment instruction or debit order loaded as this will protect you from yourself, and from deploying the funds elsewhere and derailing your healthy saving habits.  Thirdly, consider using the allowable tax deduction for contributions to a retirement fund, but remember the deduction is limited to the lesser of R350,000 or 27.5% of the higher of remuneration or taxable income.

The main benefit of saving inside a retirement vehicle is that no taxation occurs on the investments inside the retirement vehicle. This means your investments can grow unhindered by any tax drag. Another benefit is that the value of your retirement funds (excluding any disallowed contributions) may be excluded from your estate from an estate duty perspective.

Great, now you are saving, but what happens to your retirement savings when life happens?  Resignation or retrenchment, emigration, retirement, death, etc.?  This is where the yolk and the egg white get scrambled.  All the rules can make you feel confused. So, let’s unscramble retirement.

Resignation or retrenchment:

Upon resignation or retrenchment from your employer, you may need to exit the employer’s pension or provident fund. As you may not yet be of retirement age, you may have the option to access up to 100% of your retirement savings as a lump sum.  Should you decide to cash in, the lump sum will be taxed according to the retirement lump sum withdrawal tax table (in the case of resignation) and the retirement, death, and severance benefit tax table (in the case of retrenchment) respectively. The progressive tax scale ranges between 18% and 36%. For more information see:

First prize will always be to preserve the funds.  You could consider transferring your savings, tax-free, to your new employer’s pension or provident fund; alternatively to a pension or provident preservation fund or even a retirement annuity. 

As retirement annuities are a private retirement savings vehicle where the contribution is voluntary and not related to employment, your retirement annuity will not be impacted by resignation or retrenchment. A retirement annuity is a more restrictive retirement savings vehicle though. You will only be allowed to access a lump sum after the age of 55 when you retire from the fund or if the total value is less than R15,000, the full amount can be taken as a lump sum or should you emigrate from South Africa.


For pension and provident funds, there is no prescribed retirement age, and the employer-specific fund rules would stipulate a retirement date. For preservation funds and retirement annuities, generally, the earliest retirement age is 55 years but rather check the specific fund rules to confirm this.

Upon retirement from the above-mentioned pre-retirement vehicles, the type of savings vehicle will determine the maximum lump sum you would be able to withdraw from the fund.

  • For pension funds, pension preservation funds and retirement annuities, a maximum of one-third may be taken as a lump sum, the other two-thirds must be converted to an annuity.
  • For provident funds and provident preservation funds, up to 100% of the vested portion (savings before 1 March 2021) may be taken as a lump sum.  The unvested portion (savings on and after 1 March 2021) follows the same one-third lump sum, two-thirds annuity rule as mentioned above.

Any lump sum taken at retirement would be taxed according to the retirement, death, and severance benefit tax table. Once you have retired from your pre-retirement fund, the fund value minus the lump sum taken will be used to purchase an annuity. The annuity will become a post-retirement vehicle from which you can draw a monthly income and this income will be taxed according to your marginal income tax rate.


Here you need to differentiate between pre- and post-retirement savings.

  • For pre-retirement savings, there may be a way to access the funds as a lump sum. If the fund allows you to have immediate access you can withdraw the funds and the net-of-tax amount can be transferred to you. This may happen, for example, when funds are in a pension and provident fund and you resign, funds are in a preservation fund where the fund allows for a “once off withdrawal”  and the “once off withdrawal” is still intact) For savings in a retirement annuity or where the once-off withdrawal for the preservation fund has already been exhausted, you will have to be a non-SA tax resident for three years before you can access the savings as a lump sum.
  • No lump sum can be withdrawn from a post-retirement savings vehicle unless the value of the annuity is below R125,000. Should your post-retirement saving vehicle be a living annuity, you could consider increasing your drawdown to the maximum prescribed percentage allowed (currently 17.5%) and deplete the pot over several years.

Also be mindful of the workings of any double taxation agreement between South Africa and your new intended country of residence.  Depending on when you withdraw the funds and in which country you are a tax resident at the time of withdrawal, South Africa may retain or sometimes lose its taxing rights.  We suggest that you consult with your tax advisor, pre-emigration, to explore the impact of the applicable double taxation agreement and consider when the most opportune time would be to withdraw from your retirement savings bearing in mind the tax regimes applicable in both jurisdictions.


Upon your death, the beneficiaries of your pre- or post-retirement funds would be able to elect whether they want to receive the funds as a lump sum, an annuity, or a combination of the two.

For pre-retirement savings, it is important to note that even though you can nominate beneficiaries, the trustees of the pre-retirement fund should determine who your dependents are and can award your pre-retirement savings to those dependents.

For post-retirement savings, there is no such interference from trustees and therefore it is important to ensure that you nominate beneficiaries, and if possible alternative beneficiaries.  Should no beneficiaries have been nominated, your post-retirement savings will be paid to your estate where your executor will deal with the assets as prescribed in terms of your will.

Retirement reform:

Treasury has proposed that for future retirement savings, a new system is adopted where one-third of your savings goes into a “savings pot” that will be accessible pre-retirement. Two-thirds go into a “retirement pot” where the funds are preserved until retirement and converted into an annuity.  The proposed effective date is 1 September 2024.  All retirement savings accumulated before the proposed date are to be ringfenced in a “vested” pot’ and the rules that are currently applicable are to remain applicable.

Hopefully, the current applicable retirement savings rules are at least a little bit less scrambled in your mind. Start saving and remember to keep an eye out for the final verdict on the proposed “two-pot retirement system” and the future effective date.

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