New Tax Rule Targets SA Retirees Holding Multiple Living Annuities With Same Provider
- South Africa's 2026 Draft Taxation Laws Amendment Bill proposed stricter rules for retirees with multiple living annuities
- The proposed change closes a gap that allowed retirees to cash out several small annuities individually as lump sums
- Financial experts are urging retirees to review their contracts before the bill becomes law
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South African retirees who hold multiple living annuities with a single provider could soon find their cash-out options significantly reduced under proposals in the 2026 Draft Taxation Laws Amendment Bill.
The bill targets the so-called de minimis threshold, a provision that currently permits retirees to withdraw their full remaining annuity balance as a lump sum when that balance drops below a set limit. The rule exists to spare retirees the inconvenience of receiving very small, ongoing income payments from a nearly depleted fund.
How the current system works
Under existing practice, the threshold applies to each annuity contract separately. A retiree holding five living annuities, each worth R100,000, with the same insurer could cash out each one individually, walking away with a total of R500,000 in lump-sum payments.
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The proposed change would end that approach entirely.
What the new rule would mean
Going forward, the de minimis limit would apply to the combined total of all living annuities held with the same insurer or retirement fund. Using the same example, that retiree's R500,000 aggregate balance would be assessed as a single amount. If it exceeds the threshold, no cash-out would be permitted.
Experts from Tax Consulting South Africa say the reform is consistent with the South African Revenue Service's ongoing effort to close loopholes that allow retirees to structure their annuities in ways that reduce tax liability.
What Retirees Should Do Now
With the bill still moving through public comment and parliamentary processes, financial planners and fund administrators are encouraging retirees to act without delay. The key steps recommended include auditing all living annuity contracts held with the same financial institution, assessing whether any planned lump-sum withdrawals should be completed before the bill is enacted, and keeping a close eye on the legislative timeline for final commencement dates and any amendments.
The bill is still a proposal and has not yet been signed into law, but the window for retirees to act under the current rules may be narrowing.
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