Tax on retirement lump sums — how the tables work
The first R550,000 of retirement lump sums is tax-free — once, over your whole life. SARS taxes retirement, severance and death lump sums on one table (0% up to R550,000) and pre-retirement withdrawals on a harsher one (0% only up to R27,500).
Both tables are cumulative: every taxable lump sum you have ever taken is added back when the next one is taxed, so the tax-free bands can only ever be used once.
Two tables, one idea
SARS taxes retirement lump sums on their own tables, separate from salary. Which table applies depends on why the money is coming out. Retire, receive a severance package, or receive a death benefit, and the retirement table applies — its first R550,000 is tax-free. Take money out before retirement — cashing out when changing jobs, for instance — and the withdrawal table applies, where only the first R27,500 is tax-free.
One exception: savings-pot withdrawals under the two-pot system are added to your income and taxed at your marginal rate — those never touch these tables.
The retirement table (retirement, severance, death) — 2026/27
- R0 – R550,000: 0%
- R550,001 – R770,000: 18% of the amount above R550,000
- R770,001 – R1,155,000: R39,600 + 27% of the amount above R770,000
- Above R1,155,000: R143,550 + 36% of the amount above R1,155,000
The withdrawal table (pre-retirement) — 2026/27
- R0 – R27,500: 0%
- R27,501 – R726,000: 18% of the amount above R27,500
- R726,001 – R1,089,000: R125,730 + 27% of the amount above R726,000
- Above R1,089,000: R223,740 + 36% of the amount above R1,089,000
Worked examples, to the rand
Retiring with a R1,000,000 lump sum (no prior lump sums ever taken): R39,600 + 27% × (R1,000,000 − R770,000) = R101,700. R898,300 pays out.
The same R1,000,000 taken before retirement, on the withdrawal table: R125,730 + 27% × (R1,000,000 − R726,000) = R199,710. The gap — R98,010 on the same money — is the price of impatience the two tables are built to charge. What that choice looks like at resignation is worked through in “What happens to your pension when you change jobs — and what does cashing out cost?”.
The cumulative rule — the tables have a memory
Neither table starts fresh per event. They run over your lifetime: every taxable lump sum you have ever taken is added back before the next one is taxed, and the tax the earlier sums would have attracted is subtracted at the end. The effect is that the tax-free bands, and each lower bracket, get used up in order — once, ever.
Concretely: someone who once cashed out R300,000 when changing jobs and later retires with a R700,000 lump sum is not taxed on R700,000 from scratch. SARS taxes the lifetime total of R1,000,000 on the retirement table (R101,700, as above) and subtracts what the prior R300,000 alone would have attracted on that table (R0, being under R550,000). Tax now: R101,700 — against R27,000 (18% × (R700,000 − R550,000)) had nothing ever been withdrawn. The old cash-out costs an extra R74,700 at retirement, on top of whatever it paid at the time.
The tax directive — how it actually gets paid
None of this is calculated by you at payout time. Before paying any lump sum, the fund applies to SARS for a tax directive — an instruction stating exactly how much tax to withhold. SARS checks your lifetime lump-sum history at that point, and any outstanding tax you owe SARS can be deducted from the payout as well. What lands in your account is the after-directive amount. The calculator on this page runs both tables, with prior lump sums included, on your own numbers.
Terms used on this page
- marginal rate
- The tax rate on your next rand of income — the bracket the top slice of your income falls into.
- tax directive
- An instruction a retirement fund requests from SARS telling it exactly how much tax to hold back from a payout before paying you.
Reviewed July 2026 · 2026/27 tax year figures