Question:
Your FAQ ... What happens in the event of a member’s death? Your investment will be taxed on the same basis as on retirement. ... I was told that the full value of the retirement annuity is free of any estate tax and executors fees in the hands of the benefactors. Is this not correct ? DO the benefactors then pay personal tax on the proceeds from the retirement annuity inherited ?
Answer:
Jonny, There is no estate duty on the retirement annuity and the benefit is not taxed in the hands of the beneficiaries. Instead, the death benefit - if paid out as a lump sum - is taxed as though it had been received by the deceased, per the retirement lump sum tax table. The retirement lump sum tax table provides as follows: the first R500 000 is not taxed, the balance to R700 000 is taxed at 18%, the balance to R1 050 000 at 27% and any amounts above that at 36%. This table is applied to the aggregate of retirement fund lump sum benefits received by the deceased since 1 March 2009. The tax calculated in this way that relates to previous lump sums is deducted from the total tax payable to arrive at the tax payable on the current lump sum.
