Tax and SARS knowledge base
Can I cash in a small living annuity?
When can I cash in a small living annuity under the R150 000 threshold?
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Direct answer
From 1 March 2026, a living annuity may be fully commuted when its aggregate value with the same insurer or fund is below R150,000. The previous threshold was R125,000. The insurer or fund must apply for a SARS tax directive before paying the remaining value, and the lump sum is taxed under the retirement fund lump-sum benefit table.
This is not a general right to withdraw part of a larger living annuity. The test is applied to the aggregate value of living annuities held with the same provider under the applicable rules.
What this means in practice
Ask the provider for a current value and confirmation of every policy or contract included in its aggregation. A single policy below R150,000 may still fail if another living annuity with the same provider pushes the aggregate to or above the threshold.
Do not confuse this commutation limit with the separate annuitisation threshold applicable when retirement benefits are first taken. The provider should identify which rule applies to your transaction.
Step-by-step
- Request written values for all living annuities held with the provider.
- Ask the provider to confirm the aggregate amount used for the R150,000 test.
- Check whether the intended payment date is on or after 1 March 2026.
- Review the tax effect using your prior retirement lump sums, because the tax table is cumulative.
- Complete the provider's commutation documents accurately.
- Wait for the provider to obtain the SARS directive and deduct the directed tax.
- Keep the directive, payment certificate and bank proof for the tax year.
Documents and records to keep
- Policy schedules and current values.
- Provider's aggregation confirmation.
- Prior retirement and withdrawal lump-sum records.
- Commutation request, SARS directive and payment statement.
- IRP5 or other tax certificate issued for the payment.
Important limits and exceptions
The threshold alone does not determine whether cashing in is financially sensible. Commutation ends the future annuity income from that amount. Tax can also be higher than expected if previous lump sums have used part of the lifetime retirement table.
Values can move with markets. A value quoted before processing may differ when the provider performs the final test.
When to get tailored advice
Get retirement and tax advice before signing if the annuity is your main income, you have taken earlier lump sums, you may need estate planning, or several contracts are held with related providers.