At retirement the decision changes from “where should I preserve?” to “how should my retirement capital provide income for the rest of my life?”
Your fund type and components matter
The cash amount you may take and the portion that must provide an annuity depend on the type of retirement fund, vested rights, Two-Pot components and current legislation. Get the retirement quotation and component breakdown from the fund before comparing annuity options.
Living annuity vs life annuity
Living annuity
Investment-linked retirement income where you select an income rate within the regulatory range and carry investment/longevity risk.
Life annuity
An insurer provides a contractual income according to the annuity terms chosen, transferring some or all longevity/investment risk to the insurer.
Retirement tax is different from ordinary withdrawal tax
Retirement lump-sum benefits use the retirement/severance table rather than the ordinary pre-retirement withdrawal table. Previous qualifying lump sums can still affect the tax because the system is cumulative.
What to compare before retirement
- Sustainable income need.
- Guaranteed vs market-linked income.
- Investment risk and expected longevity.
- Spouse/dependant income needs.
- Estate and beneficiary implications.
- Fees and advice costs.
SARS — Retirement Lump Sum Benefits
SARS — Two-Pot tax implications
South African Government — Two-Pot retirement system
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