How long does it take for pension to pay-out after resignation in SA?

How long does it take for pension to pay-out after resignation in SA?

In South Africa, the time it takes for a pension payout after resignation typically ranges from two weeks to three months, depending on the specific policies of the pension fund and the efficiency of the paperwork processing.

When an employee resigns from their position in South Africa, they face crucial decisions about the management of their pension benefits. Understanding the exact timeline and procedural details for the payout of these funds is essential for effective financial planning. Here’s an in-depth look at the process and timeline involved in accessing pension funds after resignation, with specific details pertinent to the South African context.

What Happens to Your Pension When You Resign?

Upon resignation, you typically have a few choices regarding the disposition of your pension or provident fund:

1. Transfer the Pension: You can opt to transfer your pension savings to a preservation fund, a retirement annuity fund, or the pension fund of your new employer.
2. Withdrawal of Funds: Withdrawing your fund entirely is another option, albeit one that incurs significant tax liabilities.

Timeline for Pension Payout

The time it takes for a pension payout can vary based on several key factors:

1. Type of Fund: Private pensions, provident funds, and government employee pensions each have different processing times.
2. Fund Policies: Each fund’s specific policies and administrative procedures can impact the timing.
3. Efficiency in Paperwork: The prompt completion and submission of all required documentation by the employee also play a crucial role.

Detailed Steps in the Payout Process

1. Notification: Inform your pension fund of your resignation and indicate whether you intend to transfer or withdraw your funds.
2. Document Submission: You must submit necessary documents, which typically include application forms, a certified copy of your ID, bank details, and a letter of resignation.
3. Fund Processing: The fund validates your documents and calculates your dues. This process can take anywhere from one to eight weeks, depending on the fund’s efficiency.
4. Disbursement: Funds are then disbursed to the designated account or transferred to another fund as directed.

Expected Payout Duration

Generally, the payout process ranges from two weeks to three months. Specific funds, like the Government Employees Pension Fund (GEPF), might take up to two months due to extensive verification processes, especially if the payout amounts are substantial.

Tax Implications of Pension Withdrawal

Withdrawing your pension savings triggers tax liabilities. As of 2021, SARS tax tables dictate that lump-sum withdrawals are taxed at progressive rates, starting from 18% for amounts up to R500,000 to 36% for amounts exceeding R1,500,000. These rates apply cumulatively to all retirement fund withdrawals and severance benefits received throughout your lifetime.

Deciding what to do with your pension after resigning is a pivotal financial decision. Understanding the available options, the detailed procedural steps, and the expected timelines for receiving pension payouts is crucial. Immediate consultation with a financial advisor or direct contact with your pension fund can provide tailored advice and help you navigate this complex process efficiently.