What Happens to My Pension When I Resign in South Africa?

Resigning does not mean that all of your retirement money automatically becomes available as cash. What you can do depends on the type of fund, its rules, your vested rights and the components in your fund.

Your main choices after resignation

Depending on the fund and your circumstances, choices may include transferring eligible retirement money to a preservation fund, transferring to another approved retirement fund such as a new employer fund, leaving benefits paid-up where the fund permits it, or taking amounts that are legally available as a withdrawal benefit.

What changed under Two-Pot?

Since 1 September 2024, qualifying new contributions are generally divided between a savings component and a retirement component. SARS explains that the retirement component generally cannot be taken as a lump sum when membership ends before retirement because of resignation, dismissal, withdrawal or retrenchment; it must generally be transferred to another fund. The savings and vested components have different rules.

Why cashing out can be expensive

An ordinary withdrawal benefit can trigger retirement-fund withdrawal tax and removes money from its long-term retirement purpose. Previous relevant lump sums can also affect the tax because SARS applies the lump-sum tables cumulatively.

A useful checklist before signing forms

• Ask the fund for a current benefit statement showing the components.
• Confirm which amounts are legally available and which must transfer.
• Compare preservation, new-employer transfer and any paid-up option.
• Understand tax before choosing cash.
• Compare fees, investments, access rules and beneficiary implications before transferring.

Also read our resignation guide, Two-Pot guide and withdrawal tax calculator.