Retirement Lump Sum Tax Calculator South Africa 2026/2027
Calculate the tax on a lump sum from your pension, provident, or retirement annuity fund — whether you're resigning, retrenched, or retiring.
Withdrawal vs. retirement/severance — which table applies to you?
Withdrawal benefits — the harsher table:
A lump sum is a withdrawal benefit if it is paid:
A lump sum is a withdrawal benefit if it is paid:
- On resignation from a pension, pension preservation, provident, provident preservation, or retirement annuity fund
- As part of a divorce order assignment
- From a preservation fund, before reaching retirement age, in other qualifying circumstances
Retirement/severance benefits — the more generous table:
A lump sum is a retirement or severance benefit if it is paid on:
A lump sum is a retirement or severance benefit if it is paid on:
- Death
- Retirement (including reaching age 55)
- Redundancy
- Termination of the employer's trade
- Or, for a severance benefit specifically: relinquishment, termination, loss, repudiation, cancellation, or variation of office or employment, arranged with the employer
Why the distinction exists:
The far smaller R27,500 tax-free portion on withdrawal benefits is a deliberate policy design — it makes cashing out retirement savings early significantly more expensive in tax terms than leaving the money invested until genuine retirement, redundancy, or death. The R550,000 allowance under the retirement/severance table reflects the tax system's intent to treat money that has genuinely served its retirement-saving purpose more favourably.
Special case — the Two-Pot Savings Withdrawal Benefit:
Withdrawals from the Two-Pot system's Savings Component (available once per tax year since 1 September 2024) are taxed differently again — at your marginal income tax rate, not under either lump sum table above.
Source: SARS — Tax Directive enhancements and tax implications of the two-pot retirement system
Withdrawals from the Two-Pot system's Savings Component (available once per tax year since 1 September 2024) are taxed differently again — at your marginal income tax rate, not under either lump sum table above.
Source: SARS — Tax Directive enhancements and tax implications of the two-pot retirement system
How the two tax tables work — worked examples
Withdrawal benefit tax table (2026/2027)
| Lump sum (lifetime aggregate) | Rate |
|---|---|
| R0 – R27,500 | 0% |
| R27,501 – R726,000 | 18% of amount exceeding R27,500 |
| R726,001 – R1,089,000 | R125,730 + 27% of amount exceeding R726,000 |
| Above R1,089,000 | R223,740 + 36% of amount exceeding R1,089,000 |
Source: SARS Budget 2026 FAQ
Retirement/severance benefit tax table (2026/2027)
| 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 Budget 2026 FAQ; SARS — Retirement Lump Sum Benefits
Worked example — the same R400,000 lump sum, two different scenarios:
Scenario A: Resignation (withdrawal benefit)
Assuming no prior lump sums:
- Falls within the R27,501–R726,000 bracket
- Tax = 18% × (R400,000 − R27,500) = 18% × R372,500 = R67,050
- Net amount received: R332,950
Scenario B: Retrenchment (retirement/severance benefit)
Assuming no prior lump sums:
- Falls entirely within the R0–R550,000 tax-free bracket
- Tax = R0
- Net amount received: R400,000
The identical R400,000 lump sum results in a R67,050 tax difference, purely based on the reason for the payout.
Worked example — the dual-aggregation effect:
A person previously received a R600,000 retirement lump sum some years ago (fully using their retirement-table tax-free portion), and is now resigning and withdrawing R200,000 from a preservation fund:
A person previously received a R600,000 retirement lump sum some years ago (fully using their retirement-table tax-free portion), and is now resigning and withdrawing R200,000 from a preservation fund:
- Although this R200,000 is a withdrawal benefit, the prior R600,000 retirement benefit is included in the aggregation calculation
- Because the combined aggregate (R600,000 + R200,000 = R800,000) already exceeds both tables' early brackets, this withdrawal is effectively taxed in a higher bracket than a R200,000 withdrawal would be in isolation
- This illustrates why the "prior lump sums" inputs in the calculator above matter, even when they come from a different category than the current payout
Frequently Asked Questions
R27,500. This applies to a lump sum paid on resignation, or via a divorce order assignment, from a pension, pension preservation, provident, provident preservation, or retirement annuity fund before retirement. This is a lifetime aggregate allowance.
R550,000. This applies to a lump sum paid on death, retirement (including reaching age 55), redundancy, or termination of the employer's trade, and to severance benefits arranged with an employer. This is also a lifetime aggregate allowance.
SARS applies a less generous tax table to withdrawal benefits (R27,500 tax-free) compared to retirement and severance benefits (R550,000 tax-free) to discourage cashing out retirement savings early.
Yes. SARS aggregates withdrawal benefits with all other withdrawal benefits since March 2009, retirement benefits since October 2007, and severance benefits since March 2011. A past retirement lump sum can reduce the tax-free portion of a current withdrawal benefit.
A Savings Withdrawal Benefit is taxed at the member's marginal income tax rate, not under the withdrawal or retirement/severance lump sum tables.
Your fund administrator or employer must apply to SARS for a formal tax directive before paying out any retirement-related lump sum. SARS uses your complete recorded lifetime aggregation history to issue the directive, confirming the exact tax payable.
Related guides and tools
Related calculators
Retirement annuity calculator → Income tax calculator → Provisional tax calculator →Back to: ← Income Tax — Complete Guide
Sources:
- SARS — Retirement Lump Sum Benefits — sars.gov.za/tax-rates/income-tax/retirement-lump-sum-benefits/ (both tax tables; benefit category definitions; dual-aggregation mechanism)
- SARS — Budget 2026 FAQ — sars.gov.za (both tables confirmed unchanged 2024/25–2026/27)
- SARS — Guide on the Calculation of the Tax Payable on Lump Sum Benefits (LAPD-IT-G03) — sars.gov.za (aggregation method; worked examples)
- SARS — Tax Directive enhancements and tax implications of the two-pot retirement system — sars.gov.za (Savings Withdrawal Benefit taxed at marginal rate)
- SARS — Guide to Complete the Lump Sum Tax Directive Application Forms — sars.gov.za (formal tax directive process)
- SARS — Tax and Retirement — sars.gov.za/individuals/tax-during-all-life-stages-and-events/tax-and-retirement/
Last reviewed: June 2026. Next review: after Budget Speech February 2027 — verify both tax tables.