Can you cash out a South African retirement annuity right after aliyah?
No. If you are a South African oleh, the single most important thing to understand about your retirement annuity (RA) is that you cannot simply withdraw it because you have left for Israel. Since 1 March 2021°, the old “financial emigration” withdrawal route was replaced: a full pre-retirement RA withdrawal is now available only once you have ceased SA tax residency for an uninterrupted period of three years or longer.1 Until that clock runs out, your RA capital stays locked inside the SA fund.
This corrects a widespread misconception, and a soft error in some older aliyah guidance (including an earlier version of our own SA finance article), which implied you could apply for an emigration lump-sum withdrawal of your RA at the point of leaving. That door closed in 2021 and the SARB-emigration provision was formally deleted on 1 September 2024.1 Almost every new SA oleh is blindsided that the country they grew up in will hold their retirement annuity for three years after they are already living in Israel.
Not advice
Why is the South African RA locked for three years after you leave?
Because the law that used to release it was rewritten. Before 1 March 2021, a member who discontinued RA contributions and whose emigration was recognised by the South African Reserve Bank (SARB) for exchange-control purposes could withdraw the RA before retirement.1The 2021 amendment removed the SARB “emigrant” concept and replaced the trigger with a tax test: a member who has ceased to be a South African tax resident for an uninterrupted period of three years or longer may withdraw the full benefit before retirement, even if residency ceased before 1 March 2021.1
The transitional SARB-emigration option ran alongside the new rule for a while, but it was deleted with effect from 1 September 2024.1 So for anyone making aliyah today, there is no shortcut: the three-year non-residence test is the only route to a full RA cash-out before you reach retirement age. In aliyah terms, if you land in, say, month 0, the earliest you can pull the full RA is roughly month 36, and only after SARS accepts that your tax residency genuinely ceased.
What does “ceased to be tax resident” actually require?
Ceasing SA tax residency is a formal status, not just buying a plane ticket. You typically notify SARS that you have broken residency (ordinarily-resident and physical-presence tests both fail), and SARS issues confirmation. The three-year clock runs from the date residency ceased, not from the day you arrived in Israel, and the period must be uninterrupted, so re-establishing SA residency resets it.1 Register your Israeli status early with מס הכנסה (Mas Hachnasa) (the Israel Tax Authority) so your Israeli-resident position is documented from day one.7
How does the 2024 two-pot system change what you can reach?
The two-pot system, effective 1 September 2024, splits future contributions into a savings component (one-third) and a retirement component (two-thirds), plus a vested component for everything accrued before the switch.3 This matters for olim because the two pots have different doors:
- Savings component (one-third): You can take one withdrawal per tax year, minimum R2,000, taxed at your marginal income-tax rate.3 This is reachable while you are abroad and does not need the three-year wait, useful for a small landing fund, but it is taxed as ordinary income, not at the gentler lump-sum table.
- Retirement component (two-thirds): This is preserved for retirement and is the part that stays locked. For an oleh, the full release of this component before retirement still depends on satisfying the three-year non-residence rule.1
- Vested component (pre-September-2024 balance): Subject to a one-off seed amount that moved into the savings component (the lower of 10% of the value on 31 August 2024 or R30,000), the rest keeps its old rules.3
In other words: the two-pot reform gives you a small annual savings-side tap, but it does not unlock your full RA early. The big money still waits out the three years.
What tax does SARS charge when the RA finally pays out?
When you do withdraw, after the three years, the lump sum is taxed under the SARS retirement-fund withdrawal-benefit table, and you must first obtain a SARS tax directive before the fund is allowed to pay you anything.4 The withdrawal-benefit table currently runs:
| Cumulative withdrawal (ZAR) | Tax on this band |
|---|---|
| 0 – 27,500 | 0% (tax-free) |
| 27,501 – 726,000 | 18% of the amount above 27,500 |
| 726,001 – 1,089,000 | 125,730 + 27% of the amount above 726,000 |
| 1,089,001 and above | 223,740 + 36% of the amount above 1,089,000 |
Two traps catch olim here. First, the bands are cumulative: SARS aggregates all retirement-fund lump sums you have taken since 1 October 2007, so a prior withdrawal pushes the new one into a higher band.4 Second, the tax-free slice for a pre-retirement withdrawal is only the first R27,500, not the R550,000 that applies to a genuine retirement payout.4 Cashing out a large RA in your forties is an expensive way to access the money.
Does South Africa still tax the RA if you leave the money invested?
Yes, in part. If you keep the RA and later draw it as an annuity (income) rather than a lump sum, that pension/annuity income from a South African source is, in principle, taxable in South Africa, but as a non-resident you can apply for an RST01 tax directive for relief where the relevant double-tax agreement gives the taxing right to your country of residence.2 South Africa and Israel do have a tax treaty, so the directive route is how you stop SARS withholding on income that the treaty assigns to Israel. Lump-sum withdrawals, by contrast, are taxed under the withdrawal table above, not relieved away.4
Where does Section 9H (the exit tax) fit in?
Section 9H imposes a deemed disposal of your worldwide assets at market value on the day you cease SA tax residency, triggering capital gains tax, but SA retirement funds are excluded from that deemed disposal.5 So your RA does not get hit by the exit tax on departure; it simply stays locked and is taxed later, under the lump-sum table, when you actually withdraw. For your other assets (share portfolios, offshore investments), the individual CGT inclusion rate produces a maximum effective rate of about 18%, with an annual exclusion of R50,000.5 Those gains, not your RA, are what Section 9H actually catches.
Should you leave the RA in rand or take it out once the lock-in lifts?
There is no single right answer, and the decision is really a currency-and-risk bet. Leaving the RA in South Africa means it keeps growing tax-deferred in rand, but you carry ZAR currency risk and South African political/fiscal risk for years. The rand has repeatedly lost double-digit ground against hard currencies over short windows, and a depreciation between today and the day you finally convert is a permanent loss of Israeli purchasing power. Withdrawing after the three years lets you convert to מטבע חוץ (Matbea Chutz) and rebuild in shekel- or dollar-denominated assets, at the cost of the withdrawal tax and the loss of tax-deferred compounding.
| Consideration | Leave the RA in South Africa | Withdraw after the 3-year lock-in |
|---|---|---|
| Tax on the move | None now; lump-sum or annuity tax later | Withdrawal-benefit table; R27,500 free, then 18%+4 |
| Currency exposure | Full ZAR risk until you convert | Convert to ILS/USD; ZAR risk ends |
| Growth | Stays tax-deferred in the SA fund | Reinvest in Israel / global markets (your choice of vehicle) |
| Admin | Ongoing SARS / RST01 directive filings2 | One tax directive, then done with SARS on this asset |
How does Israel treat the RA and its eventual withdrawal?
Israel gives new olim a 10-year exemption from Israeli tax on foreign-source income and gains, which would generally cover income arising on your South African RA and on a foreign-source withdrawal during that window.7 Note the 2026 reform: from 1 January 2026, the exemption became report-but-still-tax-exempt, the foreign income stays exempt from Israeli tax, but olim who arrive in 2026 or later must now report it to the Israel Tax Authority.7So even though Israel is unlikely to tax the RA in your early years, the paperwork obligation is real for newer olim. Keep the Israeli, South African, and (if relevant) US treatments in separate mental columns, they do not collapse into a single “the tax is X” answer.
No, making aliyah does not unlock your South African retirement annuity (RA). Since 1 March 2021 the old "financial emigration" withdrawal route is gone, and the SARB-emigration shortcut was formally deleted on 1 September 2024. A full pre-retirement RA withdrawal is now available only after you have ceased South African tax residency for an uninterrupted period of three years or longer, confirmed by SARS. When that lock-in lifts, the lump sum is taxed under the SARS retirement-fund withdrawal-benefit table (first R27,500 tax-free, then 18% up to R726,000, rising to 36%), aggregated cumulatively with prior lump sums, and you need a SARS tax directive before the fund pays out. The 2024 two-pot system lets you tap only the savings component yearly; the bulk stays locked. US-citizen olim face a separate PFIC problem on the underlying unit trusts (Form 8621, Section 1291) every year they hold the RA, independent of the SA lock-in.
No. Since 1 March 2021 there is no "emigration withdrawal" for RAs. A full pre-retirement withdrawal is only available after you have ceased SA tax residency for an uninterrupted period of three years or longer, and the old SARB-emigration route was deleted on 1 September 2024. Arriving in Israel does not start a faster clock.
It starts on the date you ceased to be a South African tax resident, as confirmed by SARS, not the date you landed in Israel. The three years must be uninterrupted, so regaining SA residency resets the count. Many olim cease residency around their aliyah, making a full RA withdrawal realistic from roughly month 36 after that confirmed cessation date.
The retirement-fund withdrawal-benefit table applies: the first R27,500 is tax-free, then 18% up to R726,000, 27% to R1,089,000, and 36% above that, aggregated cumulatively with any prior lump sums since 1 October 2007. You must obtain a SARS tax directive before the fund pays out, so build that processing time into your plans.
Only the savings component, which is one-third of post-September-2024 contributions plus a small seed amount. You can take one savings-component withdrawal per tax year, taxed at your marginal rate. The retirement component, the bulk of the fund, stays locked until you meet the three-year non-residence test. Two-pot does not bypass the lock-in.
Yes. If the RA is invested in South African unit trusts or collective investment schemes, each of those is a PFIC for US tax, bringing Form 8621 and the Section 1291 regime. That applies every year you hold them, even though SARS will not let you withdraw for three years. The SA lock-in and the US PFIC obligation run on independent clocks, so take US-SA cross-border advice early.
No. Section 9H deems a disposal of worldwide assets when you cease residency, but South African retirement funds are excluded from that deemed disposal. Your RA is not taxed on departure; it is taxed later, under the withdrawal table, when you actually take the money. Section 9H instead targets assets like share portfolios and offshore investments.
It is a currency-and-risk judgement, not a rule. Staying in rand keeps the fund growing tax-deferred but exposes you to ZAR depreciation and South African political and fiscal risk. Withdrawing after three years ends that exposure but costs the withdrawal tax and lost tax-deferred compounding. A cross-border adviser can model both paths against your age, fund size, and the SA-Israel treaty before you decide.
