Will I pay tax if I transfer my provident fund to a RA?

A Fin24 user who is looking to transfer money from the provident fund to a retirement annuity, wants to know whether he will owe tax.

He writes: "I have R180 000 pa job with a provident fund. I will be moving to a new employer and would like to move away from the company's approved provident fund as it is a fund of funds and has lost me a large percentage of my investment due to the exorbitant fees.

If I were to transfer all money from the provident fund to a retirement annuity, would I, under the new tax law, owe taxes?"

Piet Nel, SA Institute of Tax Professionals responds:

A transfer from one retirement fund to another retirement fund, after 1 March 2016, will not have any tax consequences.  The tax on retirement lump sums will only be levied if the person cashes out, so to speak.

This principle was also intended to apply to an interest transferred from a provident fund. When the government announced that they will delay the implementation of the new law relating to provident funds (the annuitisation obligation) it was also said that they will change the transfer options. They didn’t give an indication of what the principle will be.

The principle is currently that a transfer from a provident fund to a pension fund, provident fund, preservation fund or retirement annuity fund will also have no tax consequences.  It is expected that this principle will not be changed.  

* Have a question? Send it to us and we will find an expert to answer.

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