Thank you for your fair question. Your question has many different segments and I will cover them below. Please do not see this as advice but as general information. My advice to you is to consult a Certified Financial Planning professional to analyze your situation and present you a tailor-made solution for your specific situation. The decisions you make now will affect the rest of your life.
Your pension fund
If you have been a member of the GEPF for less than 10 years, you are only entitled to a tip. If you have been a member of the GEPF for more than 10 years, you can receive a tip and annuity income from the GEPF.
Before 1 March 1998, civil servants were not taxed on their lump sum. The tax-free lump sum is calculated as the ratio between years worked before 1998 and the number of years you have worked for the government. The amount must be stated on your benefit overview, so that you can make an informed choice.
This means that your tax-free lump sum can be much higher than the R500,000 allowed under the current tax tables that apply to lump sums from pension funds.
If the above applies to you, it is best to invest the full lump sum to which you are entitled to tax-free in a discretionary investment from which you can derive a tax-friendly income.
In some cases it may be wise to withdraw up to R1 000 000 from the tip as the tax payable on the lump sum will be less than the tax on your annuity income. The balance of your tip, which is then taxable, can be transferred to an annuity to avoid paying tax on it.
Your pension annuities
If there isn’t a hefty penalty due on your annuity, it’s a good idea to withdraw it.
The one-third can then be invested elsewhere, and it can be allowed to grow without attracting further lump sum taxes. You will be relieved of the requirements of Regulation 28 on where to invest and if you should die, the trustees have no say over who gets your money.
You can opt for an income between 2.5% and 17.5% on the annuity component. If you have sufficient income, you can choose the lowest percentage of income and invest the income in your discretionary investment.
If you need extra income later on, you can increase the percentage.
We currently recommend an income percentage between 4 and 6% per year as the best choice, so that your annuity income can grow in the future.
Working after retirement
You also plan to continue working after retirement and have asked whether you should invest in a new annuity again.
Continuing with annuity insurance will definitely save you tax.
Retirees often forget that they get income from different sources and that all sources tax you as if you were only getting the income from one source.
You should keep track of your gross income and ask the various sources from which you earn income to adjust your tax rate. This or a huge tax bill.
Invest in a new annuity?
If you should invest in a new retirement annuity, which I assume is short-term, you can invest in it until its value is just under R247 000.
Under the current Pension Act, you can withdraw this amount at once if it is the only annuity that you have from the administrator.
I hope this information will help you and I wish you all the best in this next cycle of your life.