Retirement Annuity (RA) Tax Calculator South Africa 2026/2027

Reviewed & Verified
Written by the Independent Editorial Team · Reviewed & Verified by Solly Maanaso, CA(SA)

See how much tax you save on your retirement annuity contributions today, and estimate the tax payable on your lump sum at retirement.

The deduction is based on the greater of these two figures.
Deductible amount (capped at R430,000 or 27.5%) R 0
Excess contribution carried forward R 0
Estimated tax saving R 0
Effective cost of contribution (after tax saving) R 0
Includes any previous pension, provident, or RA payouts from job changes, retrenchments, or the two-pot Savings Component since October 2007 — these reduce your remaining R550,000 tax-free portion.
Tax-free portion remaining and applied R 0
Taxable portion of this lump sum R 0
Estimated tax payable R 0
Net amount received after tax R 0
This is a lifetime allowance, not a per-withdrawal one. SARS aggregates (adds together) all retirement-related lump sums you've received since October 2007 when calculating the tax on your current one. The first R550,000 of that lifetime total is tax-free — if you've already used some or all of it on a previous withdrawal, less (or none) remains available now.
Source: SARS — Guide on the Calculation of Tax Payable on Lump Sum Benefits
This calculator provides an estimate only. The actual tax on a retirement lump sum depends on your complete lifetime aggregation history as recorded by SARS, and is formally confirmed via a tax directive issued to your fund administrator. Consult a registered tax practitioner or financial adviser for guidance specific to your situation.

How your RA contribution reduces your tax

You can deduct retirement fund contributions (to a pension, provident, or retirement annuity fund) up to the lower of:
  • 27.5% of the greater of your remuneration or taxable income, or
  • R430,000 per year
Source: SARS Budget 2026 FAQ

The deduction reduces your taxable income before tax is calculated — so the actual rand saving depends on your marginal tax rate. A contribution that qualifies in full for the deduction saves you tax equal to: contribution amount × your marginal tax rate.

Worked example:
An employee earning R600,000/year taxable income, in the 31% marginal bracket, contributes R60,000 to a retirement annuity in the year:
  • 27.5% × R600,000 = R165,000 (well above the R60,000 contributed, so the full amount qualifies)
  • Tax saving ≈ R60,000 × 31% = R18,600
  • Effective "cost" of the R60,000 contribution, after the tax saving: R41,400

Unused contributions are not lost:
If your contribution exceeds the deductible cap in a given year, the excess carries forward to the next year of assessment, where it can still be deducted.
Source: SARS Budget 2026 FAQ

Use the calculator above ↑

How tax on your retirement lump sum is calculated

The one-third / two-thirds rule:
At retirement from a pension, pension preservation, or retirement annuity fund, you may take a maximum of one-third of your retirement interest as a cash lump sum. The remaining two-thirds must be used to purchase an annuity, providing you with a regular income.
Exception: if your total retirement interest in that fund is R360,000 or less (increased from R247,500, effective 1 March 2026), you may take the full amount as a cash lump sum — no annuity purchase is required.
Source: SARS — Tax and Retirement page; SARS Budget 2026 FAQ

The retirement lump sum tax table (2026/2027)

Taxable lump sum (lifetime aggregate) Rate
R0 – R550,000 0%
R550,001 – R770,000 18% of amount exceeding R550,000
R770,001 – R1,155,000 R39,600 + 27% of amount exceeding R770,000
Above R1,155,000 R143,550 + 36% of amount exceeding R1,155,000

Source: SARS — Retirement Lump Sum Benefits tax rates page (confirmed no changes for the 2027 tax year)

The lifetime aggregation principle — the most important thing to understand:
The R550,000 tax-free portion (and the brackets above it) apply to the total of all retirement-related lump sums you have ever received, going back to October 2007 — not separately to each individual payout. If you previously cashed out a pension fund when you changed jobs, took a retrenchment lump sum, or withdrew from the Two-Pot Savings Component, those amounts are added to your current lump sum before the tax table is applied.
Source: SARS — Guide on the Calculation of Tax Payable on Lump Sum Benefits

Worked example — first-time retiree

A person retiring with a R682,000 cash lump sum (after the one-third commutation), with no prior retirement-related lump sums:

  • Taxable lump sum: R682,000
  • Falls within the R550,001–R770,000 bracket
  • Tax = 18% × (R682,000 − R550,000) = 18% × R132,000 = R23,760
  • Net amount received after tax: R658,240

Worked example — with a prior lump sum

The same R682,000 lump sum, but this person previously received a R600,000 taxable lump sum from an earlier job change:

  • The R550,000 tax-free portion was already fully used by the prior R600,000 lump sum
  • The full current R682,000 lump sum is now taxed starting from where the aggregate total left off — calculated as the tax on the combined total (R1,282,000), less the tax already paid on the R600,000 portion
  • This produces a materially higher tax bill than the first example, despite an identical current lump sum

Source: SARS — Guide on the Calculation of Tax Payable on Lump Sum Benefits (aggregation method)

Annuity income is taxed separately, later, as ordinary income:
The two-thirds portion used to purchase an annuity is not taxed at the point of purchase. Instead, the regular income you receive from that annuity is taxed as ordinary income, at your marginal tax rate, using the standard annual income tax brackets and rebates — in the same way as a salary.
Source: SARS — Tax and Retirement page

Frequently Asked Questions

You can deduct the lower of 27.5% of your remuneration or taxable income, up to R430,000 per year. Excess contributions carry forward to the next year.
Your tax saving equals your deductible contribution multiplied by your marginal tax rate.
The first R550,000 of your lifetime aggregate retirement lump sums is tax-free. Previous retirement payouts reduce this available allowance.
Amounts between R550,001 and R770,000 are taxed at 18%. Between R770,001 and R1,155,000, it is R39,600 plus 27%. Above R1,155,000, it is R143,550 plus 36%.
You can take up to one-third of your retirement interest as a cash lump sum. The remainder must purchase an annuity, unless your total fund value is R360,000 or less, which can be taken fully in cash.
Yes. The lump sum is taxed once using the retirement tax table. The remaining annuity income is taxed as ordinary income at your marginal tax rate.

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Income tax calculator → PAYE calculator → Provisional tax calculator →

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Tax deadlines 2026/2027 →

Back to: ← Income Tax — Complete Guide

Sources:

  1. SARS — Budget 2026 FAQ — sars.gov.za (R430,000 deduction cap; R360,000 annuitisation de minimis; R150,000 living annuity commutation threshold)
  2. SARS — Retirement Lump Sum Benefits — sars.gov.za/tax-rates/income-tax/retirement-lump-sum-benefits/ (lump sum tax table; confirmed unchanged for 2027 tax year)
  3. SARS — Tax and Retirement — sars.gov.za/individuals/tax-during-all-life-stages-and-events/tax-and-retirement/ (one-third/two-thirds rule; annuity income taxation)
  4. SARS — Guide on the Calculation of the Tax Payable on Lump Sum Benefits (LAPD-IT-G03) — sars.gov.za (aggregation method; worked examples)
  5. Income Tax Act 58 of 1962 — Section 11F (retirement fund contribution deduction); Second Schedule (lump sum benefit taxation)

Last reviewed: June 2026. Next review: after Budget Speech February 2027 — verify the deduction cap and lump sum tax table.