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55-year-old non-resident has a retirement annuity that has matured. The amount is in excess of R1 million. Can he withdraw the full amount? If so, what tax rate would be applied? Will it be treated as a withdrawal benefit or a retirement benefit?
Dear reader,
Generally speaking, with the exception of a few specific instances, retirement annuities do not allow withdrawals to be made prior to retirement.
Having reached the age of 55, you are, however, permitted to retire from the fund should you wish to do so.
Retirement from a retirement annuity of which the value exceeds R247 500 entails that a maximum of one-third of the investment value be taken as a lump sum (subject to tax in accordance with the retirement tax tables).
The balance should be transferred to a compulsory annuity that will provide you with a taxable pension income going forward.
Given that access to capital is limited to a maximum of one third, retirement will not enable you to access the full capital amount that you require.
With effect from March 1 2021 fund members who have ceased to be tax resident, as specified by the South African Revenue Service (Sars), for an uninterrupted period of three years or longer, may withdraw the full benefit before the member elects to retire from the fund.
Prior to this date, pre-retirement lump sum withdrawals were only permitted upon exchange control emigration.
Should you meet the requirements above, you will be permitted to access the full fund value.
The withdrawal will be taxed as a withdrawal benefit as follows and is cumulative of all withdrawals from a member’s retirement funding over their lifetime (before or during retirement).v
| Lump-sum | Tax |
| R0 – R25 000 | 0% |
| R25 001 – R660 000 | 18% of any amount over R25 000 |
| R660 001 – R990 000 | R114 300 + 27% of any amount overR660 000 |
| R990 001+ | R203 400 + 36% of any amount overR990 000 |
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