When South Africa targets foreign pensions: What retirees need to know
Retirees with foreign pensions who are tax resident in South Africa could face significant changes to their retirement income, as the government proposes to remove a key tax exemption. Here’s what you need to know to plan ahead.
Julian Adshade ● Sep 16, 2025
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The National Treasury plans to remove the tax exemption on foreign retirement benefits for South African residents who earned pensions while working abroad. If passed, the change will take effect from 1 March 2026.
How the 2025 draft taxation laws amendment bill affects foreign pensions
Historically, certain foreign pensions received by South African residents have been exempt from income tax. Under Section 10(1)(gC)(ii) of the Income Tax Act, residents currently qualify for an exemption on specific foreign retirement benefits. This ensures that any lump sum, pension, or annuity paid from outside South Africa for work performed abroad is not taxed twice.
Currently, South Africans who worked overseas and contributed to foreign retirement funds can receive these benefits tax-free while resident in South Africa. The 2025 draft taxation laws amendment bill, however, proposes to remove this exemption.
It’s important to note that foreign personal pensions, where contributions aren’t linked to employment, are not considered past employment funds, so the exemption rules do not change for these.
Likewise, social security payments remain exempt under Section 10(1)(gC)(i) of the Income Tax Act and are not affected by the proposed changes.
Who will be affected?
The proposed changes will primarily affect retirees who are tax resident in South Africa and rely on foreign pension income earned from past employment, which is currently exempt from tax.
Potential impact on retirees and the South African economy
We believe that removing the exemption could discourage wealthy South Africans from returning, deter foreigners from retiring in South Africa, and even push those already living in the country to consider emigrating.
Retirees contribute significantly to the local economy by purchasing property and paying taxes such as VAT, Capital Gains Tax, and estate duty.
While countries like Greece, Portugal and Mauritius offer generous tax incentives to attract retirees, South Africa risks losing its competitive edge by moving in the opposite direction with these changes.
What retirees should do now
- Seek specialist advice: If you receive a foreign pension and are or plan to become a South African tax resident, consult a tax professional to understand how the draft changes could affect you.
- Evaluate your residency status: Depending on your circumstances, adjusting your tax residency may be a useful strategy to manage potential tax liabilities.
- Watch for final regulations: These proposals are still in draft form, and adjustments may be made before the legislation is finalised.
- Stay informed: Monitor updates from the National Treasury and trusted financial commentators to assess the broader impact on your retirement planning.