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Browse the FAQFAQ — pension planning
Practical clarity on the rules that affect your pension, tax, and monthly drawdowns — without the legal jargon.
The two-pot system splits your retirement fund into a vested pot (your savings before the change), a savings pot (one-third of new contributions), and a retirement pot (two-thirds). You can withdraw from the savings pot once a year, but the retirement pot stays locked until you retire. The savings pot is taxed at your marginal rate, so it's worth planning the withdrawal carefully.
A living annuity gives you control over investments and lets you choose an income drawdown rate between 2.5% and 17.5% per year. A provident fund payout is a lump sum you can take at retirement, but you'll need to manage that money yourself. The right choice depends on your need for income stability, investment risk, and how long you expect to draw an income.
Yes, for most retirement fund withdrawals, the fund administrator must receive a tax directive from SARS before they pay out. This ensures the correct tax is deducted upfront. Without it, you risk a higher tax bill later or a delayed payout. You can apply via SARS eFiling, and the process usually takes a few business days.
A common rule of thumb is to keep your drawdown rate below 5% per year, especially if you're retiring before 65. Higher drawdown rates increase the risk of running out of money, especially during market downturns. Review your income needs annually and factor in cost-of-living adjustments, but avoid increasing your drawdown just because the market had a good year.
You can stay on your employer's medical scheme after retirement, but you'll likely pay the full contribution yourself. Some schemes offer special retiree options with lower premiums, but they may have reduced benefits. It's important to budget for medical costs in your retirement income plan, as healthcare inflation often outpaces general inflation.
Retirement annuities generally fall outside your estate for executor fees, but they may still be subject to estate duty if the total value of your estate exceeds the threshold. Naming a beneficiary on your annuity can help speed up the payout and avoid the executor process. It's wise to review your beneficiary nominations regularly, especially after major life events.