Question:
If a retirement annuity worth R100 000 is cashed in at age 55, would there be costs involved in cashing in earlier and, if so, would it be a large amount on R100 000, eg tax, fees? If the amount after all the deductions is then R75 000, could the balance be taken as cash :)
Answer:
Kim,
It is not possible to cash in a retirement annuity before age 55, other than on the basis of (proven) disability and formal emigration. Even cashing in at age 55, you will be required to use at least two-thirds to purchase an annuity that will pay you a pension for life. If the two-thirds amounts to R50 000 or less, you may also commute that part to cash. In other words, if your total retirement annuity savings amount to R75 000 or less, you may take the entire balance as cash. The R75 000 refers to the value of your retirement annuity, after deducting all outstanding costs. Given the size of your retirement annuity (ie R100,000 and assuming you have not cashed in other retirement savings already), no tax would be deducted from your cash lump sum (R33 334) if you could retire from your retirement annuity now. Your annuity income would be taxed according to the prevailing personal income tax tables.
