Tax implications for withdrawing pension fund

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Will2k

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What are the tax implication for withdrawing you pension fund?

I will be going abroad and am considerring withdrawing it and investing it in property or elsewhere.
How much will tax be?
Can you withdraw the entire amount?
Is there a part that will be tax free? If so, what's the threshold?

Hope you guys can help me out.
Thanx
 
I take it your not going to take the preservation option then...

Contact your pension fund, by law they have to supply the information if you request it.
 
Will2k said:
What are the tax implication for withdrawing you pension fund?

I will be going abroad and am considerring withdrawing it and investing it in property or elsewhere.
How much will tax be?
Can you withdraw the entire amount?
Is there a part that will be tax free? If so, what's the threshold?

Hope you guys can help me out.
Thanx
Click to expand...

The tax is not that much.
Dunno about a pension fund but a retirement fund only allows you to withdraw from it once so it's best to take it all in one go if you ask me.
Not sure on the tax free portion.

Speak to your pension/retirement fund managers.
 
The last time I asked (in 2003!) I was told that one would get taxed on the withdrawal from the pension fund at the average of your last two year's tax rates.

NOTE: The laws in this regard may have changed.
 
Will2k said:
What are the tax implication for withdrawing you pension fund?

I will be going abroad and am considerring withdrawing it and investing it in property or elsewhere.
How much will tax be?
Can you withdraw the entire amount?
Is there a part that will be tax free? If so, what's the threshold?

Hope you guys can help me out.
Thanx
Click to expand...

Have you ever seen the goatse.cx image? Because in laymans terms that is what SARS does to you.
 
^^^ That they do, I took mine (would not leave any money with Old Mutual) and got hit for 14k tax :(
 
Will2k said:
What are the tax implication for withdrawing you pension fund?

I will be going abroad and am considerring withdrawing it and investing it in property or elsewhere.
How much will tax be?
Can you withdraw the entire amount?
Is there a part that will be tax free? If so, what's the threshold?

Hope you guys can help me out.
Thanx
Click to expand...

You get taxed at your average rate over the previous two years. There is a small tax free lump sum (it was only R1800 but new legislation is being put in place but it still won' be much).

Your best bet, unless SARS closes that loophole, is to move it into a preservation fund without taking a withdrawal (as you are usually only allowed one ever) and then leave the country. After two years you make your one withdrawal and get taxed at only 18%, the minimum as you have paid 0 tax over the past two years! The thing is you would need to keep a South African bank account as it would usually only pay into an SA account.

(This again is just an idea and proper advice relating to your specific situation would need to be given... don't hold me liable for this, get professional advice!)
 
blunomore said:
The last time I asked (in 2003!) I was told that one would get taxed on the withdrawal from the pension fund at the average of your last two year's tax rates.

NOTE: The laws in this regard may have changed.
Click to expand...

LancelotSA said:
You get taxed at your average rate over the previous two years. There is a small tax free lump sum (it was only R1800 but new legislation is being put in place but it still won' be much).
Click to expand...

For a change I was right when it came to financial issues.

I appoint myself Lancelot's new assistant ! :D
 
As stated earlier, legislation has been promulgated to change the way lump sums are taxed..... This image states with effect from 1 June but only the R22,500 has been implemented and the tax rates are still under discussion.

Clipboard017.jpg


Read this article which asks almost the same question as you and the answer discusses these new proposed tax laws :

http://personalfinance.iafrica.com/retirement/1692840.htm
 
Nerfherder said:
Keep it where it is or transfer it to an overseas fund.
Click to expand...

Really not sure where you get your advise from or what it is based on... but regarding the first point I always question the wisdom of leaving your monies in the control of the company you are leaving. Yes, they are obligated to act in the best interests of the members as trustees but any investment decision is made by them rather than you. Rather transfer it, without any tax implications, into your own preserver for which you can dictate portfolio choices etc.

As regards the second part, you would still have the same tax implications if you do that (before even considering if it would be allowed/possible to do a direct transfer from a South African fund to a foreign fund. My view is that it is not possible). SARS is not into charity and would not miss an opportunity to get their tax!
 
Last edited:
If you want pm me and I will put you in contact with someone that will give you good advice.
 
How do I withdraw funds ?

I had a pension at a previous job which I I can no longer remember the name of. How do I find it and withdraw those funds?
 
google Guide on Taxation in South Africa 2010/11 and you will find

Clipboard01.jpg
 
JLove said:
I had a pension at a previous job which I I can no longer remember the name of. How do I find it and withdraw those funds?
Click to expand...

A broker should be able to find it for you if it is on the Astute system or, if not, then if you at least know which company administered the fund. Worst case scenario they can contact your old company's HR department and ask who administers it.
 
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