SARS is coming after retirement savings

Proposed tax law changes targeting foreign pensions signal that the South African Revenue Service (SARS) may extend new tax burdens to retirement funds, potentially undoing years of retirement planning and reducing future income security.

Africorp Advisory Services explained that recent tax law amendments clearly signal that SARS is eyeing retirement funds as a possible low-hanging fruit to boost revenue collection and strengthen the fiscus.

In August 2025, the National Treasury published the 2025 draft Taxation Laws Amendment Bill (2025 draft TLAB) and the 2025 draft Tax Administration Laws Amendment Bill (2025 draft TALAB).

The draft amendments propose removing the foreign pension tax exemption and instead imposing a tax obligation on South African tax residents who have worked abroad and accumulated foreign retirement funds.

In the case of foreign nationals who become South African tax residents, it proposes taxing their foreign retirement funds.

The changes proposed by the National Treasury are currently limited in scope and still need to follow the legislative process.

However, Africorp warned that the policy direction suggests that retirement funding as a whole may be on SARS’s radar.

Employee benefit specialists and tax experts warned that such a major shift cannot be ignored. This is because it could upend years of meticulous retirement planning and potentially erode people’s hard-earned nest eggs.

These experts argue that the government should not impose a different tax treatment on retirement funding.

Individuals who made prudent decisions under one set of tax rules years ago could suddenly be saddled with unexpected tax liabilities that were never factored into their original strategy for a secure retirement.

Unless action is taken, Africorp said many may feel a real-world economic impact, with fewer rands and cents in their pockets.

People could find themselves with reduced retirement income, not because of poor planning, but because the rules changed after the fact.

Pension funds are not untouchable

The current proposal seeks to scrap the long-standing tax exemption on foreign retirement funds received by or accrued to a South African tax resident from past employment abroad.

Although the future of specifically foreign pension funds will still be debated in Parliament, if adopted, the change will take effect on 1 March 2026.

Considering this, South Africans living abroad, expatriates who have returned home, and foreign nationals settled in South Africa with offshore pensions.

Africorp urged these individuals to urgently reevaluate their retirement strategy, as this development could fundamentally change their financial outlook in retirement.

“Today, it is foreign pensions. Could local retirement annuities, pension funds, or preservation funds be next?”

Africorp pointed out that this new policy direction evokes memories of the controversy surrounding prescribed assets that surfaced a few years ago.

Reintroduced in the ANC’s 2019 election manifesto, the proposal aimed to instruct institutional investors, including pension funds, to invest set portions of their money in government-specified projects and state-owned enterprises (SOEs).

At the time, many feared the misallocation of capital and the long-term erosion of pensioners’ wealth. Ultimately, the idea did not translate into formal policy, but it has made many wary of any proposals to tinker with pension funds.

“Yes, nothing is final yet, but the indications are that your pension savings may not be as untouchable as you think,” Africorp Advisory Services said.

“A wait-and-see approach is simply too risky. Every delay may chip away at your financial future and retirement security.”

Africorp stressed that people should act before the rules change and the taxman has the final say. This entails taking stock, seeking expert advice, and ensuring retirement plans are protected and structured in a tax-efficient way.