Is my pension taxed in South Africa?
Yes, a pension or annuity you draw in retirement is taxed as income on the normal SARS table, at your marginal rate, the same scale that applied while you were working. What changes in retirement is not the rate table but the rebates: from age 65 you get an extra rebate, and from 75 another on top, which lifts the income level at which tax starts. Your fund usually deducts PAYE before paying you, so the tax is collected as you go.
This is about ongoing monthly pension or living-annuity income. A once-off retirement lump sum is taxed differently, on its own table, and is a separate question.
The normal table, with bigger rebates
Pension and annuity income is added to any other income you have and taxed on the standard individual table. The rates do not soften with age. What softens is the rebate, which is a flat amount subtracted from your tax.
For the 2026 year of assessment the rebates are:
- Primary, all ages: R17,235
- Secondary, ages 65 to 74: an additional R9,444
- Tertiary, age 75 and older: an additional R3,145
Because a rebate is money off your tax, the extra age rebates raise the income level at which any tax is due. Those tax thresholds for the 2026 year are:
- Under 65: R95,750
- 65 to 74: R148,217
- 75 and older: R165,689
A 68-year-old whose total income is below R148,217 pays no income tax for the year. The same income for someone under 65 would already be taxed, because they only get the primary rebate.
A worked example
Take a 70-year-old drawing a pension of R220,000 for the 2026 year, with no other income. That sits in the first bracket, taxed at 18%, and the person qualifies for both the primary and secondary rebates.
- R220,000 x 18% = R39,600
- Rebates: R17,235 + R9,444 = R26,679
- R39,600 less R26,679 = R12,921 tax for the year
Compare a person under 65 on the same R220,000. They get only the primary rebate:
- R39,600 less R17,235 = R22,365 tax for the year
The age rebate saves the 70-year-old R9,444 over the year, the exact value of the secondary rebate. The fund withholds the R12,921 as PAYE across the twelve monthly payments, so there is normally nothing extra to pay on assessment if the pension is the only income.
When retirees still owe at year end
The clean result above assumes one source of income. Many retirees have more than one: two annuities, or a pension plus rental or investment income. Each payer deducts PAYE only on the slice it pays, applying the rebate and low brackets to its own portion. Added together at year end, your income can sit in a higher band than any single payer assumed, and you owe the difference on assessment. The fix is the same as for anyone with multiple income streams: ask a fund to deduct at a higher rate, which SARS allows through a fixed-rate directive, so the monthly PAYE tracks your real liability.
Frequently asked questions
Is pension income taxed in South Africa?
Yes. A pension or annuity drawn in retirement is taxed as income on the normal SARS table at your marginal rate. Your fund generally deducts PAYE before paying you. The relief in retirement comes from the extra age rebates, not from a lower rate table.
Do I pay less tax after 65?
You get a larger rebate, not a lower rate. For the 2026 year the secondary rebate of R9,444 is added at 65, and the tertiary rebate of R3,145 at 75. These raise the threshold at which tax starts, to R148,217 for ages 65 to 74 and R165,689 from 75, so less of your pension is taxed.
Why do I owe SARS when my pension already had PAYE deducted?
Usually because you have more than one source of income. Each payer deducts PAYE only on its own portion, applying the rebate and bottom brackets separately, so the combined deductions fall short of your true tax. SARS adds the sources together on assessment and you settle the gap.
Is a retirement lump sum taxed the same as my monthly pension?
No. A once-off lump sum at retirement is taxed on a separate lump-sum table, not the normal income table that applies to your ongoing monthly pension or annuity. They are two different calculations.
Work out your retirement tax
To see what your pension should cost in tax, run it on the table with the right age rebate. Our Basic income tax and PAYE calculator applies the 2026 SARS table and rebates so you can check the PAYE on your annuity. Our guide on tax on a retirement or provident fund withdrawal covers the separate lump-sum side, our piece on tax brackets and rebates sets out the bands and age rebates, and our explainer on how PAYE is calculated shows how a fund arrives at the monthly deduction.
SARS sources:
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