Retirement Tax Calculator
Calculate retirement contribution deductions and lump sum tax.
Last reviewed: Tax year: 2026/2027Source: SARS — Retirement fund lump sum benefits
The retirement tax deal, briefly
Money you put into a registered retirement fund in South Africa — pension fund, provident fund, or retirement annuity (RA) — is tax-deductible up to a cap. That means you pay no income tax on the amount contributed, which can cut your tax bill significantly. The fund itself grows tax-free (no dividends tax, no CGT, no income tax on interest). The trade-off is that withdrawals and retirement lump sums get taxed at special rates.
For 2026/2027, the deduction cap is 27.5% of your remuneration or taxable income (whichever is greater), up to R430,000 per year. Budget 2026 raised the cap from R350,000 — the first increase since 2016. Contributions above the cap are not lost: excess amounts roll over to the next tax year.
How the 27.5% rule works
The 27.5% limit is applied to the greater of your remuneration (gross salary before deductions) or your taxable income (after other deductions). For most employees this just means 27.5% of their gross annual package, capped at R430,000.
| Your remuneration | Maximum deductible |
|---|---|
| R300,000 | R82,500 (27.5%) |
| R600,000 | R165,000 (27.5%) |
| R1,000,000 | R275,000 (27.5%) |
| R1,563,637 or more | R430,000 (cap reached) |
Anything contributed above the cap in a given year isn’t deductible that year, but it’s remembered: it carries forward and offsets tax in future years (or reduces the taxable portion of your retirement lump sum when you eventually withdraw).
Worked examples — contribution tax savings
R500,000 salary, R40,000/year RA contribution
Under 65, 31% marginal income tax rate.
- Salary
- R500,000
- 27.5% of salary
- R137,500 (well above contribution)
- RA contribution (fully deductible)
- R40,000
- Tax saving at 31%
- R12,400
R1,500,000 salary, R450,000/year into an RA
Higher earner at 41% marginal rate. Contribution above the R430k cap.
- Salary
- R1,500,000
- 27.5% of salary
- R412,500 (limit)
- Hard cap
- R430,000
- Deductible this year (lower of the two)
- R412,500
- Carried forward to next year
- R37,500
- Tax saving this year at 41%
- R169,125
The two-pot retirement system (from Sep 2024)
Contributions made on or after 1 September 2024 split into two components inside your fund:
- Savings pot (1/3) — accessible before retirement (from the first 12-month anniversary of contributions). Withdrawals are taxed at your marginal income tax rate, not the concessionary retirement lump-sum table.
- Retirement pot (2/3) — locked until retirement. At retirement, either annuitised or up to 1/3 taken as a lump sum (depending on fund rules).
- Vested pot — everything accrued before 1 September 2024 keeps its original rules (up to 1/3 lump sum at retirement, the rest annuitised for pension funds; full access for provident fund members 55+).
Savings-pot withdrawals during your working years are a convenience, but they’re taxed aggressively — a R50,000 withdrawal at a 36% marginal rate costs you R18,000 in tax plus the permanent loss of compounding on that R50k for the rest of your working life. Use sparingly.
Retirement lump-sum tax tables (2026/2027)
At retirement (age 55+), you can take up to one-third of your fund as a lump sum. The first R550,000 is taxed at 0%. Above that, the table:
| Lump sum | Rate |
|---|---|
| R0 – R550,000 | 0% |
| R550,001 – R770,000 | 18% of amount above R550,000 |
| R770,001 – R1,155,000 | R39,600 + 27% of amount above R770,000 |
| R1,155,001 and above | R143,550 + 36% of amount above R1,155,000 |
Withdrawals before retirement (resignation, emigration) use a separate, less generous table — only the first R27,500 is tax-free.
| Withdrawal | Rate |
|---|---|
| R0 – R27,500 | 0% |
| R27,501 – R726,000 | 18% of amount above R27,500 |
| R726,001 – R1,089,000 | R125,730 + 27% of amount above R726,000 |
| R1,089,001 and above | R223,740 + 36% of amount above R1,089,000 |
Pension vs provident vs RA — practical differences
- Pension fund — employer-sponsored. Up to 1/3 cash lump sum at retirement, 2/3 annuitised.
- Provident fund — employer-sponsored. Since 1 March 2021, new contributions follow pension-fund rules (1/3 lump sum cap). Balances accrued before that date (“vested benefit”) keep full-lump-sum rights.
- Retirement annuity (RA) — personal, independent of your employer. Same tax deduction. Cannot be accessed before 55 (except in narrow cases: emigration, permanent disability, or small-balance rule under R15,000).
For the tax deduction, all three count toward the same 27.5% / R430k cap. Contributing to both an RA and an employer pension doesn’t let you double-dip.
How this calculator works
Enter your taxable income and your RA / pension contribution, and the calculator shows the maximum deductible contribution (27.5% capped at R430k), the portion that gets deducted this year, any excess that carries forward, and the immediate tax saving at your marginal rate.
The calculator also supports lump-sum estimates: enter the lump sum amount and indicate whether it’s a retirement or pre-retirement withdrawal, and the 2026/2027 tax table is applied.
Sources
Frequently Asked Questions
You can deduct up to 27.5% of the greater of your remuneration or taxable income, subject to an annual cap of R430,000.
At retirement, the first R550,000 is tax-free (cumulative across all lump sums received since 1 October 2007). Amounts above that are taxed at 18%, 27%, or 36% depending on the bracket. Pre-retirement withdrawals have a lower tax-free threshold of R27,500.
A retirement lump sum is received when you retire, are retrenched, or become disabled. A withdrawal lump sum is taken before retirement (e.g., when resigning). Retirement and retrenchment lump sums have a higher tax-free amount (R550,000) and more favourable brackets than withdrawal lump sums (R27,500 tax-free).