Can you cash out or move your South African living annuity after aliyah?
No. A living annuity is a post-retirement income product, not a savings pot you can empty, so making aliyah does not let you commute it to a single lump sum or transfer it out of South Africa. By law a living annuity must keep paying you an income, drawn between 2.5% and 17.5% of the residual capital each year2. The live cross-border question for an oleh is therefore not "how do I get it out" but "who taxes the income, and how do I stop South Africa withholding tax that the treaty says belongs to Israel."
Not advice
This is the point that blindsides almost every South African oleh who is already retired. Your friends who left with a retirement annuity (RA) talk about a three-year wait and then a cash-out; you, holding a living annuity, have no cash-out at all in the ordinary case. The annuity stays in rand, keeps paying you a monthly or annual income, and the real work is managing the tax and the currency conversion of that income stream, year after year, from Israel.
How is a living annuity different from a retirement annuity (RA)?
The two are easy to confuse because both are "retirement" products, but they sit at opposite ends of your life. An RA is a pre-retirement savings vehicle: you contribute during your working years, and (since 1 March 2021) an oleh can withdraw it in full only after three uninterrupted years of confirmed South African non-residence. A living annuity is what you typically buy with two-thirds of your retirement interest at retirement2: it converts your capital into a regulated income stream and, by design, cannot simply be handed back to you as cash.
That design difference is the whole story for an oleh. The RA articles on this site are about unlocking a frozen pot; this article is about a pot that is already paying out and will keep paying out in rand for the rest of your life, with the only escape valve being a narrow de minimis commutation rule covered below.
When, if ever, can a living annuity be fully commuted?
Only when it is small. Under the SARS de minimis rule, you may commute the entire living annuity to a single lump sum once its value at one insurer falls below the prescribed threshold, which rose to R150,000 with effect from 1 March 2026 (previously R125,000)3. The threshold is measured per insurer, so two small annuities with the same insurer are added together. If you do qualify and commute, the lump sum is taxed under the SARS retirement lump-sum table, not at your marginal income rate4. For most retired olim the annuity is well above this line, so the income-stream rules, not the lump-sum rules, are what govern your life.
South African side: how does SARS tax the annuity income, and does it withhold?
Yes, SARS withholds by default. A South African living annuity pays a South-African-source income, and the fund operates PAYE on it: by default it deducts employees' tax before paying you, even after you have become a non-resident living in Israel1. Nothing about your move automatically switches that off. Left alone, you would have rand withheld at source in South Africa and potentially face Israeli tax on the same income once your exemption window ends, which is exactly the double-tax outcome the treaty exists to prevent.
To stop the withholding you apply to SARS for an RST01 directive ("Application by Non-Resident for a Directive for Relief from South African Tax for Pension and Annuities") through eFiling. You attach a certificate of residence, your contribution/employment history, and proof that the income is declared in your country of residence; SARS works the application within about 21 working days and the directive is valid for three years1. If tax was already withheld before your directive was in place, you recover it by filing an ITR12 return and then an RST02 refund request1. Plan for a gap: the first few payments after aliyah may well be taxed in South Africa until the directive lands.
Treaty side: which country gets to tax the annuity income?
Israel, in the ordinary case. The 1979 South Africa-Israel double-tax convention assigns the taxing right on a private (non-government) pension or annuity to your country of residence5. Once you are an Israeli tax resident, the treaty therefore says your private South African living-annuity income is taxable in Israel, not South Africa, which is precisely the legal basis the RST01 directive relies on to switch off SARS withholding15. Keep this separate in your mind from the Israeli domestic exemption below: the treaty decides which country may tax; the Israeli exemption then decides whether Israel actually does.
One carve-out matters: a government-service pension (for work done for the South African state) is generally taxed by South Africa as the source country, not by your residence state5. If your annuity was bought with a government-service pension, do not assume the residence-state rule applies; confirm which article of the treaty governs your specific fund with a cross-border adviser before filing an RST01.
Israeli side: does Israel actually tax the income once it arrives?
Usually not, for your first decade. New olim receive a 10-year exemption from Israeli tax on foreign-source income, which generally covers South-African-source annuity income6. So even though the treaty assigns the taxing right to Israel, Israel chooses not to tax this income for ten years. Register your Israeli-resident status early with מס הכנסה (Mas Hachnasa) (the Israel Tax Authority) so your residence position is documented from day one, which is also what your RST01 certificate of residence rests on.
Flag the 2026 change. 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 report it to the Israel Tax Authority each year7. So the annuity income is unlikely to be taxed by Israel in your early years, but if you are a newer oleh the reporting obligation is real even while the tax is zero. Keep the three columns, South African, treaty, and Israeli, separate; they do not collapse into a single "the tax is X" answer.
Worked example: R20,000-a-month annuity, home vs Israel
Suppose your living annuity holds R3,000,000 and you draw 8% a year, R240,000, paid as R20,000 a month. The same payment is treated very differently depending on where you stand.
| Stage | South Africa (SARS) | Israel |
|---|---|---|
| While still an SA resident | PAYE withheld at your SA marginal rate on the R240,0001 | Not yet relevant: you are not an Israeli resident |
| After aliyah, before your RST01 directive | PAYE still withheld by default; recover via ITR12 + RST02 once relieved1 | Covered by the 10-year exemption; report-only for 2026+ arrivals67 |
| After aliyah, with the RST01 directive in place | Withholding switched off: treaty gives the right to Israel15 | Still exempt under the 10-year rule (report-only for 2026+)67 |
The cross-border punchline: with the directive in hand, your R240,000 a year arrives without South African tax and is not taxed by Israel during the exemption window, so the practical job shrinks to converting rand to shekels efficiently. A native Israeli pensioner never has either side of this, no foreign withholding to switch off, no foreign-source exemption to track, which is exactly why this cannot be a translation of resident pension content.
How do you actually get the rand to Israel each month?
The annuity is paid into a South African bank account in rand; getting it to Israel is a separate FX exercise you will repeat for years. Two practical levers decide how much of your income survives the journey:
- The exchange-rate spread and transfer fees. Converting to מטבע חוץ (Matbea Chutz) (foreign currency) through a bank's retail rate is usually the most expensive route. Specialist transfer services typically quote a tighter spread; for a recurring annuity income the spread compounds across every monthly transfer, so a small percentage saved each month is a meaningful sum over a retirement.
- Batching versus monthly. Some retirees take the annuity monthly in rand and convert in larger, less frequent batches to cut per-transfer costs and average out the rate; others convert monthly for predictable cash flow. There is no universally right answer, only a cost-versus-certainty trade-off.
- ZAR currency risk. Because the capital stays in rand, you carry South African currency risk on the whole annuity for life. A rand that weakens against the shekel between today and the day you convert is a permanent cut to your Israeli purchasing power, and there is no way to fully hedge a lifetime income stream away.
Quick check
After aliyah, what is the correct first move to stop SARS withholding South African tax on your private living-annuity income?
A South African living annuity cannot be cashed out in full or moved out of South Africa just because you have made aliyah: by law it must keep paying you an income, drawn between 2.5% and 17.5% of the residual capital each year. Full commutation is only possible under the de minimis rule, once the value at one insurer falls below R150,000 (raised from R125,000 on 1 March 2026). SARS withholds South African tax (PAYE) by default, even from a non-resident, so to switch it off you apply for an RST01 directive proving Israeli residence and that the income is declared in Israel. The 1979 SA-Israel treaty assigns the taxing right on a private annuity to your country of residence, and Israel's new-oleh 10-year exemption then usually shelters the income, though olim arriving in 2026 or later must report it each year even while it stays untaxed. US-citizen olim face a separate layer: the unit trusts inside the annuity are PFICs, triggering Form 8621 and the Section 1291 regime every year.
Not in the ordinary case. A living annuity must keep paying you an income, so it cannot be commuted to a single lump sum or transferred abroad simply because you have made aliyah. The only full-commutation route is the de minimis rule: you can take the whole value as a lump sum once it falls below R150,000 at one insurer (raised from R125,000 on 1 March 2026), taxed under the retirement lump-sum table.
By default, yes. The fund operates PAYE and withholds South African tax even from a non-resident, until you put an RST01 directive in place. The directive invokes the SA-Israel treaty, which assigns the taxing right on a private pension or annuity to your country of residence, so once granted SARS stops withholding.
Apply to SARS through eFiling for an RST01 directive, attaching a certificate of Israeli residence, your contribution history, and proof the income is declared in Israel. SARS works it in roughly 21 working days and the directive lasts three years. If tax was withheld before relief was in place, recover it by filing an ITR12 return and an RST02 refund request.
Generally not for your first ten years. The new-oleh 10-year exemption covers foreign-source income, including South-African-source annuity income. From 1 January 2026, however, the exemption is report-but-still-exempt: olim arriving in 2026 or later must report the income to the Israel Tax Authority each year even though it stays untaxed.
Almost always, yes. The unit trusts inside a South African living annuity are PFICs for US tax, bringing Form 8621 and the Section 1291 regime every year you hold them, on top of US tax on the annuity income itself. The South African, Israeli, and US treatments run on independent clocks, so take US-SA cross-border advice early.
Different product, different stage of life. A retirement annuity (RA) is a pre-retirement savings pot that an oleh can withdraw in full only after three uninterrupted years of confirmed SA non-residence. A living annuity is what you buy with two-thirds of your retirement interest at retirement: it pays an income and cannot be cashed out at all in the ordinary case, so the three-year RA rule does not apply to it.
It is a cost-versus-certainty judgment, not a rule. Converting monthly gives predictable cash flow but pays the exchange spread every time; batching into larger, less frequent transfers can cut per-transfer costs and average the rate, at the price of less smooth income. Either way you carry ZAR currency risk on the rand-denominated capital for life, so compare transfer-service spreads against your bank's retail rate before committing.
