A preservation fund is designed to receive qualifying retirement-fund money when you leave an employer and want to keep that money in the retirement system rather than cashing it out.
Access depends on the applicable fund rules, the source and components of the money and current retirement-fund law. Tax can also depend on previous relevant lump sums. Before instructing a withdrawal, confirm what is accessible and estimate the tax using our withdrawal tax calculator.
Rules for withdrawing from a preservation fund
Do not assume that the whole preservation-fund balance is freely available whenever you want it. The answer depends on the legal nature of the benefit, applicable vested rights, the Two-Pot component structure and the specific fund rules. Ask the fund administrator to confirm which component or benefit can be accessed before relying on an estimated payout.
Tax on a preservation fund withdrawal
Where an amount is treated as an ordinary retirement-fund withdrawal, the SARS withdrawal lump-sum table can apply and the calculation is cumulative with certain previous relevant lump sums. A savings-component withdrawal under Two-Pot is different: it is generally taxed at the member’s marginal income-tax rate. The SARS tax directive determines the final tax treatment.
Why people use preservation funds
- To keep retirement capital invested.
- To avoid triggering tax simply by receiving a cash withdrawal, where a tax-neutral transfer is available.
- To choose an investment strategy outside the old employer arrangement.
- To maintain a dedicated retirement asset until retirement.
What to compare before transferring
| Area | Questions to ask |
|---|---|
| Costs | What are the advice, administration, platform and investment charges? |
| Investments | What portfolios are available and are they appropriate for the time to retirement? |
| Access | What access is allowed under the current law, fund rules and Two-Pot components? |
| Retirement | What choices will be available when you retire? |
| Beneficiaries | How are death benefits dealt with under retirement-fund law? |
Preservation fund vs retirement annuity
Both are retirement vehicles, but their funding source, access rules and use cases differ. If you are transferring money from an employer fund, compare the legal transfer routes and the product/fund rules rather than choosing solely on investment performance.
Compare preservation fund vs RA
What is a preservation fund in South Africa?
A preservation fund is a retirement fund that can receive qualifying money transferred from an employer pension or provident fund when you leave employment. The purpose is to keep retirement savings invested rather than automatically taking cash. Whether a particular transfer is allowed, and which benefits remain accessible, depends on the transferring fund, the receiving fund and the applicable law.
People commonly compare a preservation fund with leaving benefits in an existing employer fund (where permitted), transferring to a new employer fund or taking an eligible cash withdrawal. The best route depends on the components of your benefit, costs, available investment choices and retirement objectives.
Can you withdraw money from a preservation fund?
Some preservation benefits may permit a limited pre-retirement withdrawal, but it is incorrect to assume that every member can withdraw their full balance once, or that the same rule applies to all components. Older vested rights, the savings component, the vested component and the retirement component can have different access rules. The fund administrator should confirm your exact benefit breakdown and any previous withdrawals before you make a decision.
Under the Two-Pot system, savings-component withdrawals generally follow their own eligibility and tax treatment. Retirement-component amounts are generally preserved until retirement, subject to statutory exceptions. Do not treat an online tax estimate as proof that the amount is available for withdrawal.
Questions to ask your fund before withdrawing
- What is the current value of each component of my benefit?
- Which portion, if any, can I legally withdraw before retirement?
- Have I already used a withdrawal right that affects this benefit?
- What tax directive and processing requirements apply?
- What charges, investment consequences or transfer restrictions should I consider?
Preservation fund withdrawal tax and calculator
An eligible ordinary pre-retirement lump-sum withdrawal is generally assessed under the SARS withdrawal-benefit tax table, taking relevant previous lump sums into account. Savings-component withdrawals are generally taxed at the individual's marginal income-tax rate instead. Retirement and qualifying severance benefits have different tables and conditions. SARS determines the final amount through the applicable tax directive.
Use the calculator for an illustration, then confirm the available benefit and tax classification with your fund.
How to transfer retirement money to a preservation fund
- Ask your existing fund for a leaving-service benefit statement and the breakdown of your retirement components.
- Confirm the preservation fund is an eligible receiving fund and compare costs, investment choices and access rules.
- Request the required transfer documentation and ask whether the proposed transfer can be processed without an immediate taxable cash payment.
- Check beneficiary information and confirm the transfer is completed before treating the balance as invested.
Processing time varies between administrators. Obtain a written confirmation rather than relying on a generic payout timetable.
Common preservation-fund questions
Is a preservation fund the same as a retirement annuity?
No. They are both retirement-fund arrangements, but their funding sources and withdrawal rights differ. Compare preservation funds and retirement annuities before choosing a transfer route.
Can I transfer a provident fund to a preservation fund?
A qualifying transfer may be possible, subject to the relevant legislation and fund rules. Confirm how vested rights and Two-Pot components will be treated.
Should I preserve or cash out after resigning?
Compare the immediate cash need, any tax payable, the future value of invested capital and other financial resources. See our preserve versus withdraw guide.
Can I use a calculator to find out how much I can withdraw?
A tax calculator can estimate tax on an assumed eligible amount. It cannot determine whether a specific fund component is legally accessible or replace a SARS directive.
Leaving employment with retirement savings?
Before signing withdrawal or transfer forms, request a free review of your available options. Personalised advice, where provided, is delivered by an appropriately authorised adviser/FSP.
Request my free retirement-fund reviewSARS — Retirement Lump Sum Benefits
SARS — Two-Pot tax implications
South African Government — Two-Pot retirement system
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Request a no-obligation review before you submit a final withdrawal, transfer or retirement instruction.
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