MONEY CLINIC: I'm retiring later this year. Where can I invest my R700 000 pension?

A Fin24 user, set to retire in August this year, is looking at options on where he can invest his pension payout. He writes:

I retire on 31 August 2020 and must decide where to place my pending lump-sum pension payment (+/- R700 000). I bank with Standard bank, and the branch manager says that he will invest the money in the so-called Money Market. A stock-broker advises me to give the money to him and he will invest it on/in the stock market. Please advise.

Lauren Davids, Senior Investment Consultant at 10X investments responds:

Retirement can be a very uncertain and unsettling time, with so many options to consider when deciding what to do with one of your biggest assets, your retirement savings.

Important factors to consider when making your decision:

  • Tax on the lump sum payment
  • Accessibility/liquidity: Do you want to be able to access your money at short notice?
  • Investment time horizon: How long do you plan on staying invested for?
  • Fees/costs associated to your investment. This could include possible upfront and/or ongoing fees including administration, investment management, financial advisor/broker commissions
  • Portfolio construction: The asset allocation of investment

Assumption is made that this R700 000 is less than or equal to 1/3rd of your pension fund (pre-tax 1/3rd lump sum)

Tax on the lump sum payment

The retirement lump sum table will be applicable to your cash lump sum as follows:

2020 tax year (1 March 2019 - 29 February 2020)

money clinic

R500 000 taxed at 0% with remaining R200 000 taxed at 18%

R200 000 x 18% = R36 000 tax liability

Resulting in a cash lump sum of R664 000 net of tax

The above calculation assumes that you have not previously retired/withdrawn from any other retirement funding vehicles and have not taken any cash lump sums.


If you wish to have access to your monies as and when required, consider looking at a Unit Trust Investment. A money market account will provide you with liquidity (ease of access); however, if you are investing for the long term (5+ years), inflation risk could be a concern. 

Time horizon 

Your investment time horizon should be considered. Will you be investing for the shorter term (6 -12 months) or will you be investing for the longer term (5+ years)? Time horizon can also determine the investment vehicle you utilise (e.g. an endowment, unit trust investment, bank notice deposit or tax-free savings account). 


The fees that may be applicable to your investment is another important factor. Costs can include administration fees, investment management fees, upfront and/or ongoing commissions and other fees. This could have an impact on your investment and the growth that is achieved. Do your research around this and compare the different offerings available with different service providers. 

Asset allocation

If you go the investment route (e.g. taking out a unit trust) the composition of a portfolio will be important. Short-term investing will generally incorporate defensive assets being cash and bonds, whereas medium- to long-term investing will have a diversified approach, incorporating growth assets and all four asset classes, being cash, bonds, property and equities. For the longer-term investor (5+ years), holding too much cash in one’s portfolio poses the risk of inflation erosion. Diversification is important and reduces risk or volatility by investing in a variety of assets. 

Compiled by Allison Jeftha. 

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Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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