Lebo asks what the tax implication would be for a 51-year-old woman who is taking early retirement because of illness
Maya replies: According to Rowan Burger of Liberty, ill-health is defined in the Income Tax Act as qualifying for the tax-free benefit on retirement. This means that the less onerous retirement tax tables would apply.
One-third of the pension fund can be withdrawn and two-thirds paid into an annuity. Of the one-third lump sum, R300 000 would be tax free — thereafter the retirement tax tables would apply: 18% on the next R300 000, 27% on amounts between R300 000 and R600 000 and 36% tax levied on amounts over R600 000.