If you’ve been contributing to your employer’s pension fund and are contemplating retirement, you may be curious as to what the process of formal retirement entails.Let’s assume that you currently have R6 million invested in your company’s pension fund and are considering formal retirement within the next few months. Here’s what the process entails:
Once you have made the decision to retire, your financial advisor should contact the retirement fund service provider and request a tax simulation based on your tentative decision, keeping in mind that this can take a couple of days. The tax simulation will reflect the tax you will be liable for should you take your R2 million cash commutation.
When calculating the tax payable on your R2 million commutation, the following tax tables will apply: Taking these assumptions into account, tax on your one-third cash commutation would be calculated as follows: * 36% + R143 550=R447 750