Question:
Good day, I resigned and joined another company and want to withdraw R25 000 from my old employer's provident fund transfer the rest to my new employer's pension fund. What amount will I be taxed and at what rate?
Answer:
Monica, You will be taxed on R25 000. The first R25 000 of your provident fund withdrawal is not taxed, so if this is your first (retirement fund) withdrawal you will pay no tax, If it is your second, you would most likely pay tax at 18%. Note that in terms of new retirement reforms coming into place, provident fund members will be required to use two-thirds of their savings at retirement to buy an annuity, but their vested rights will be protected, ie your provident fund balance at 31 March 2015, and subsequent returns on this balance, will fall under the old rules. Oops, we just had an earthquake. Anyway, if you transfer to a pension fund before, you will lose this vested right, so you should consider doing the transfer only after 1 March 2015, or transferring to a provident preservation fund instead, if this flexibility is important to you.
