Pension when you resign!

[DK@MyBroadband]

My wife is about to resign from her job and will not be going back to work for a while. She has a pension fund with Alex Forbes through the business she works for. What we are trying to understand is the following:

1. If she decides to cash her pension what are the tax implications?
2. If she decides to keep the pension does she still need to make her current monthly payments or can she just leave it with Alex Forbes for the time being?

Thanks for the advice.

 

[Baxteen]

I just did the same thing. also though Alex Forbes.

taking up to R22500 is tax free, then there are brackets that will be communicated via the person managing the pension. (she should have had all these questions answered already actually)
also do not expect that some to come into your account quickly. a close friend resigned in Jan and still has not gotten her payout. I am trying a different approach, making myself indebted to the company and making an agreement to pay back with pension, maybe that will light a fire where its needed and let them jump on paying out faster.

keeping the pension in a holding with alex forbes is the easier way. there is no financial implications to that. they do assume you will keep the money with them. it also earns interest there

 

[owl]

If she takes the cash it will be added to her income for the year and taxed at that rate.

She should transfer it to a preservation fund with Alex Forbes or any other preservation fund of her choice.

 

[curbs2012]

She can transfer, tax free to a preservation fund. AF should be able to assist with this as they should have or manage pres funds.

If you can do without it, don't take the R22500 now. It reduces your tax free portion that you will use when you eventually retire and access the pension. Also negating the effects of compounding by taking it now.

If she decides to take her pension now, its called a withdrawal (tax table for withdrawal) as I am assuming she has not reached retirement age yet. So tax rates will be slightly different.

 

[borga]

If she takes the cash it will be added to her income for the year and taxed at that rate.

How about no, this is a lump sum which is taxed based on a separate tax table, so it is most definitely not taxed as part of your income.

Still better to keep it there as you pay at lower tax tables at retirement, for an amount of 1 mil, you pay about 94.5k more in tax by taking it now vs at retirement.

 

[Pitbull]

I just did the same thing. also though Alex Forbes.

taking up to R22500 is tax free, then there are brackets that will be communicated via the person managing the pension. (she should have had all these questions answered already actually)
also do not expect that some to come into your account quickly. a close friend resigned in Jan and still has not gotten her payout. I am trying a different approach, making myself indebted to the company and making an agreement to pay back with pension, maybe that will light a fire where its needed and let them jump on paying out faster.

keeping the pension in a holding with alex forbes is the easier way. there is no financial implications to that. they do assume you will keep the money with them. it also earns interest there

She can transfer, tax free to a preservation fund. AF should be able to assist with this as they should have or manage pres funds.

If you can do without it, don't take the R22500 now. It reduces your tax free portion that you will use when you eventually retire and access the pension. Also negating the effects of compounding by taking it now.

If she decides to take her pension now, its called a withdrawal (tax table for withdrawal) as I am assuming she has not reached retirement age yet. So tax rates will be slightly different.

Just to add to this: This R 22 500 exemption only applies once. So if she uses it now and later she has her pension paid out again she will be taxed on the full amount. So, if she has paid out a pension fund before she will not qualify for the exemption again this time round.