Question:
I was retrenched in 2002 and transferred my full pension to a pension preservation fund. Can you perhaps assist and advise: will the R34 000 tax-free portion fall away completely if I made a partial withdrawal from my pension before age 55? Or will it still apply when I retire at age 55, taking into account the partial withdrawal? I am 51 years old and in a bit of a financial crisis at the moment. Thanks
Answer:
Rasheda,
We are not sure where your R34 000 tax-free portion comes from. The standard tax-free portion on withdrawal is R22 500 (allowed only once on all your withdrawals), but you may have some contributions included that were not allowed as a tax deduction. If you withdraw now (all or just a part), then you would utilise that tax-free portion.
At retirement (earliest age 55), the standard tax-free portion is R315 000 (plus contributions not allowed for tax). Any amounts you withdraw now will reduce your tax-free portion at retirement. So if you withdrew R315 000 now, R34 000 would not be taxed and the balance would be taxed at 18%. At retirement, say you had another R315 000 left in the fund, you would not qualify for any tax-free amounts and the entire balance would be taxed at 18%.
