1. Preservation of retirement savings

A tax-free transfer from the Pension Fund to a Preservation Fund. You choose the underlying fund in which units will be purchased and you can change the fund in future. You are allowed one withdrawal, subject to tax, before the minimum retirement age (typically 55).

Pros:

• No tax at transfer
• Investor has a choice of fund to invest (now and in future) to diversify portfolio
• Quarterly reporting
• compound growth effect of savings to retirement
• Flexibility of one withdrawal pre-retirement

2. Transferring funds to a Retirement Annuity or another Pension Fund

A tax-free transfer of funds from the Penion Fund into a Retirement Annuity or another Pension Fund ( NB: ensure the transferring fund rules allow such transfer). Transfer from a Pension Fund to a Provident Fund is not tax free. If more than R 7000, you can only access funds after the age of 55.

Pros:

• No tax at transfer
• Quarterly reporting
• Compound growth effect of saving to retirement

3. Withdrawal of Retirement Savings

Withdrawing retirement savings in cash pre-retirement. This is the least preferential option from a financial planning perspective. Any value higher the R 25 000 is taxable at withdrawal ( see the withdrawal table) AND AGAIN at retirement. SARS view this as a double penalty due to the tax-deductible contribution benefit up front. In order to receive the full benefit of compounded growth, refrain from withdrawing  retirement savings in cash pre-retirement.

Pros:

• Double tax
• Potential loss of future compound growth