Question:
I was employed with a company for 27 years and in October 2012 we were informed that we had been retrenched. At the time I received a retrenchment package of R315 000 tax-free. Obviously I will not be entitled to this when I retire. Subsequently this amount has increased? At the time I transferred my pension fund to a preservation fund. I now want to exercise my one option to withdraw an amount to settle my bond. I currently owe R700 000, the amount would I need to withdraw. Are there any other tax-free portions that are available to me?
Answer:
Keith,
With the increase in the tax-free amount to R500 000 on retirement, you will receive a further R185 000 tax free. You will have to take a lump sum of roughly R885 000 to clear R700 000: R185 000 will not be taxed, R200 000 will be taxed at 18%, R350 000 at 27% and R150 000 at 36%. This assumes that your only previous "retirement lump sum" was the R315 000 retrenchment benefit.
