Retirement Lump Sum Tax Tables 2026/27: How Much Tax on Your Payout?

By Finance Guide Editors Updated October 2026 · 5 sources · 4 min read

Prices and facts checked 16 October 2026. We don't accept payment for rankings.

Short answer: when you retire, the first R550,000 of the lump sums you take from your retirement funds over your lifetime is tax-free. Above that, tax rises in steps to 36%. If you withdraw (for example, cash out a pension fund when you resign), only the first R27,500 is tax-free and the rest is taxed from 18%. Both tables are cumulative: earlier lump sums use up your tax-free amount (National Treasury Budget 2026 tax guide; SARS retirement lump sum page).

Table 1: Retirement lump sums (and severance benefits)

Used when you retire from a pension, provident, preservation or retirement annuity fund, on death, or for a severance benefit (Treasury tax guide):

Table 2: Withdrawal lump sums (before retirement)

Used when you take cash from a fund before retirement, for example on resignation from a pension or provident fund, or from a preservation fund:

Two-pot savings withdrawals are different. They're taxed at your normal marginal rate, not with these tables (SARS). See our two-pot withdrawal tax calculator.

How much tax on a retirement lump sum? Examples

First lump sum, no previous withdrawals, using Table 1:

We calculated these with the published table.

Why earlier withdrawals cost you later

The tables are cumulative. SARS works out the tax on all your lump sums together (including withdrawal lump sums since March 2009 and retirement lump sums since October 2007), then subtracts the tax already calculated on the earlier ones (Treasury tax guide).

Example: Sam cashed out R100,000 from a pension fund years ago. At retirement, Sam takes a R1,000,000 lump sum.

• Tax on R1,100,000 under Table 1: R39,600 + 27% × R330,000 = R128,700
• Minus tax on the earlier R100,000 under Table 1: R0
• Tax on the R1,000,000 = R128,700, compared with R101,700 if Sam had never withdrawn

That earlier R100,000 used up part of Sam's R550,000 tax-free amount.

Withdrawal examples

Using Table 2, with no earlier lump sums:

Preserving instead of withdrawing keeps your money growing and avoids this tax now. Under the two-pot rules, money in the retirement component can't be taken in cash on resignation anyway (National Treasury two-pot FAQ).

How the payout works

1. Your fund applies for a tax directive. You'll need to be registered for tax and give your tax number (SARS).
2. SARS calculates the tax using your lump sum history and tells the fund how much to withhold.
3. SARS deducts any tax debt you owe from the payout.
4. You may not need to file a return just for this. Under the 2026 filing notice, a single retirement lump sum taxed under a directive didn't by itself require a return (Moonstone on the SARS notice).
5. The rest is paid to you. The amount you don't take in cash buys a pension (annuity), which is taxed as income each month.

FAQ

How much of my retirement lump sum is tax-free?

The first R550,000 over your lifetime, across all your retirement funds, reduced by any earlier lump sums you've taken.

Is the R550,000 tax-free amount per fund?

No. It's per person and cumulative across all funds.

How are pension withdrawals taxed when I resign?

Using the withdrawal table: the first R27,500 is tax-free, then 18% up to R726,000, rising to 36%.

Are two-pot withdrawals taxed with these tables?

No. Two-pot savings withdrawals are added to your income and taxed at your marginal rate.

Did the tables change for 2026/27?

The figures in the Budget 2026 tax guide are the same as in recent years: R550,000 tax-free at retirement and R27,500 on withdrawal.

Changelog: 16 Oct 2026, first published with the 2026/27 tables.