Retrenchment can create two separate financial questions: how to fund your immediate living expenses and what to do with your retirement money. They should be considered together, but they are not the same decision.
Your fund may contain different components
Under Two-Pot, your fund can include vested, savings and retirement components with different access rules. The retirement component generally cannot simply be cashed out when employment ends before retirement.
Retrenchment tax needs careful classification
Do not assume every payment received after retrenchment qualifies for the retirement/severance lump-sum table. The nature of the payment and SARS tax directive matter. Salary-related amounts such as leave pay can be treated differently from a qualifying severance benefit.
Build an unemployment cash-flow plan first
Work out essential monthly expenses, available emergency savings, severance amounts and realistic time to new employment. This helps determine whether retirement money genuinely needs to be accessed rather than treating the entire fund as emergency cash.
Read the full retrenchment guide and use the retirement-fund calculators.
Primary sources
For material tax and Two-Pot decisions, check the current rules directly with SARS and your retirement fund. Useful official sources include SARS retirement lump-sum tax tables and SARS Two-Pot guidance.
Before you submit a withdrawal or transfer instruction
Get a free review of the options you are considering. If personalised assistance is appropriate, your enquiry may be referred to an appropriately authorised financial adviser/FSP.
Request a free retirement-fund review