Thinking of retiring abroad? Here’s how your South African pension income will be taxed

Retirement is meant to be a time for sunsets, not spreadsheets, but if you’re planning to spend your golden years overseas, it’s important to know how your South African pension income will be taxed once you’ve settled abroad.

Whether you’re already receiving a monthly pension income or considering tax emigration from South Africa, the rules around pension tax and withdrawal can feel a little complex. Let’s make sense of it together.

Top 3 key takeaways about your South African pension income, post-emigration:

1. You can’t withdraw your full pension after emigration – Once you’ve started receiving a monthly pension, that income continues as normal, even if you move abroad.
2. Tax still applies in South Africa – Your pension is considered South African-sourced income, which means you must still file a South African tax return every year.
3. Tax emigration helps avoid double taxation – Completing tax emigration can ensure your pension is taxed correctly and that you claim any double taxation relief available under an international tax treaty.

Pension, provident, or retirement annuity — what’s the difference?

Let’s clear up a common confusion first.

• A pension fund is typically set up by your employer, and when you retire, you can take up to one-third as a lump sum and must use the rest to buy a pension (annuity) that pays a monthly income.
• A provident fund used to allow full lump-sum withdrawals at retirement, but since the rules changed, it now operates much like a pension fund — with some transitional benefits for older members.
• A retirement annuity (RA) is a personal investment you contribute to privately, and you can only access it after turning 55 (unless you’ve completed tax emigration and waited three years).

So, while these funds all fall under the umbrella of retirement savings, the way you access and tax them depends on your fund type, age, and residency status.

Read more: What’s the difference between a provident fund, pension fund and retirement annuity?

If you’ve already retired and are receiving a pension

Here’s the key part: if you’re already drawing a monthly pension income, you cannot withdraw the full value of your fund after emigration.

Your retirement savings have already been converted into an annuity, which means you now receive a regular income stream instead of a lump sum. The capital underlying that income stream cannot be accessed, but the good news is that you can still emigrate and continue receiving your pension abroad — it just stays taxable in South Africa.

Because your pension income is South African-sourced, you’ll need to:

• File an annual tax return with SARS.
• Pay South African income tax on that pension.
• Possibly claim tax relief in your new country of residence if there’s a Double Tax Agreement (DTA) in place.

For example, under many DTAs, you’ll be taxed in South Africa but can claim that tax as a credit in your new country, so you shouldn’t pay twice.

What about tax emigration — is it still necessary if I am retired and drawing a pension income?

If you’ve already retired, you might wonder whether completing tax emigration is worth it.

Here’s the short answer: yes, in most cases it’s still a good idea. Formally changing your tax residency status from “resident” to “non-resident” helps you:

• Prove to SARS (and your new home country’s revenue authority) that you’re no longer ordinarily resident in South Africa.
• Simplify your global tax position.
• Avoid being taxed twice on other types of income, such as investments or rental earnings.

That said, tax emigration doesn’t affect how your pension income is taxed — it remains taxable in South Africa because it’s income sourced within the Republic.

So, while tax emigration won’t make your pension tax-free, it will ensure you’re fully compliant and can benefit from DTA relief where applicable.

Read more: Emigration and changing your tax resident status after leaving South Africa.

What about the new two-pot retirement system?

If you’re not yet retired or you still have retirement annuity or provident fund savings, you’ll likely have questions about the two-pot retirement system that came into effect in 2024.

Here’s a quick recap of how the two-pot system works in South Africa:

• Your contributions are now split into two parts — a savings pot (accessible before retirement) and a retirement pot (preserved until you retire).
• You can withdraw from the savings pot once a year, subject to tax, even before retirement.
• The retirement pot must remain untouched until you reach retirement age or meet qualifying criteria like tax emigration (after the three-year waiting period).

So, if you emigrate before you retire, you might still be able to withdraw eligible funds from your savings or vested pots once the three-year rule has passed — but not from a pension that’s already in payment.

Read more: Expats and the two-pot retirement system – what are your withdrawal options?

Can you transfer your South African pension abroad?

While pension income can be paid directly into your South African bank account, many expats prefer to transfer it internationally to fund their lifestyle abroad.

FinGlobal can help facilitate:

• Pension income transfers from South Africa to your overseas bank account.
• Currency conversion at competitive exchange rates.
• Tax clearance and SARS approvals if you’re transferring lump sums or capital amounts.

This ensures your pension income arrives safely and efficiently, without the usual cross-border red tape.

Read more: Maximising your retirement savings – exploring the option of transferring a South African pension fund abroad.

Staying compliant (and stress-free) during retirement

Retiring abroad should be about freedom and comfort, not worrying about tax forms and exchange control. But the truth is, staying compliant with SARS and understanding how your pension income is taxed will save you a lot of trouble down the line.

Here’s what to remember:

• Your pension income remains taxable in South Africa.
• You still need to submit an annual tax return.
• Tax emigration and DTA relief can help streamline your situation.

FAQs about South African pension income abroad

1. Do I still have to pay tax in South Africa on my pension if I live abroad?
   It depends on your tax residency status. If your pension is paid from a South African source, SARS may still tax it at source. However, if your new country has a double taxation agreement (DTA) with South Africa, you might be able to claim relief and avoid paying tax twice.
2. Can I transfer my South African pension overseas after emigrating?
   Not as a lump sum if you’re already receiving pension income. Instead, your monthly/quarterly/annual payments can be made to your South African bank account and transferred abroad through an authorised international money transfer provider like FinGlobal.
3. What happens to my pension after I complete tax emigration?
   Once you’ve completed tax emigration and become a non-resident, you’ll only be taxed in South Africa on South African-sourced income — such as your pension or annuity — not your global earnings.
4. How can I stop being taxed twice on my pension income?
   You can apply the relevant double taxation agreement between South Africa and your new country of residence. FinGlobal can help ensure the correct treaty relief is applied so you don’t pay tax twice on the same income.
5. How can FinGlobal help me manage my South African pension from abroad?
   FinGlobal takes care of the tax, compliance and transfer process for South Africans living overseas. From confirming your tax residency to securing DTA relief and transferring your pension income abroad, we make it simple, safe and compliant.

FinGlobal: expert help for South African retirees abroad

At FinGlobal, we’ve helped thousands of South Africans retire abroad with confidence — ensuring their pension transfers, tax compliance, and cross-border financial planning are handled professionally from start to finish.

Whether you need help understanding your pension tax obligations, applying for tax emigration, or transferring your retirement income overseas, our specialists are here to make it simple. Because your retirement should be about enjoying life, not worrying about SARS.

Ready to simplify your retirement income while starting a fresh chapter overseas? Get in touch with FinGlobal for personalised advice and a free, no-obligation consultation.