Retirement Lump Sum Benefit as per Second Schedule to the Income Tax Act,
No. 58 0f 1962 - Layman Version

Accessing Your Lump Sum Benefit Before Retirement (South Africa)

 

This information explains the specific conditions under which a person, referred to as a “member,” can receive a lump sum payment from a benefit fund before reaching their official retirement age. To be eligible for such a payment, a member must meet one of the following two clearly defined criteria:

 

Condition 1: Officially Recognised Emigration from South Africa

• • • This condition applies to individuals who were residents of South Africa and have formally emigrated from the Republic.
    • Crucially, this emigration must be officially recognised by the South African Reserve Bank (SARB) specifically for the purposes of exchange control.
    • There are strict deadlines associated with this recognition:
      • The application for this recognition must have been received by the SARB on or before February 28, 2021.
      • Furthermore, the approval for the delivery of foreign currency related to this recognition must have been granted by the South African Reserve Bank or an authorised dealer on or before February 28, 2022.

Condition 2: Continuous Non-Residency for an Extended Period

• • • This condition applies to individuals who are not currently a resident of South Africa.
    • To qualify, the individual must have been a non-resident for an uninterrupted period of three years or longer.
    • This continuous period of non-residency must have commenced on or after March 1, 2021.
    • In essence: For a member to receive a lump sum benefit before retirement, they must either have formally emigrated from South Africa with specific SARB recognition under historical deadlines, or they must have maintained a continuous non-resident status for at least three years, beginning on or after March 1, 2021
    • The sources outline specific conditions under which a member can receive a lump sum benefit prior to their retirement date. One of these conditions details a “3-year lock-up” period for non-residents.

The “3-Year Lock-Up Rule” for Pre-Retirement Lump Sum Benefits

• • This rule refers to Condition 2 for accessing a pre-retirement lump sum benefit, which applies to individuals who are not residents of South Africa.
  • To qualify under this specific condition, a person must meet the following criteria:
    • • Non-Resident Status: The individual must not be a resident of South Africa.
      • Duration of Non-Residency: They must have maintained this non-resident status for an uninterrupted period of three years or longer. This means there should be no breaks or returns to resident status during this three-year period.
      • Commencement Date: This continuous period of non-residency must have commenced on or after March 1, 2021. This is a crucial starting point for calculating the three-year duration.
  • In essence, if you are a South African who has ceased to be a tax resident and have remained a non-resident for a continuous period of at least three years, with that period beginning on or after March 1, 2021, you may then be entitled to receive a lump sum benefit from a South African fund prior to your official retirement date.
  • This condition provides an alternative pathway to accessing your lump sum benefit before retirement, separate from the more historically specific emigration recognition process by the South African Reserve Bank (SARB) that applied to applications received on or before February 28, 2021.