Are retirement benefits tax-exempt?
BLOG 1: Are retirement benefits tax-exempt?
A retiree has access to tax free lump sum retirement benefit up to a maximum of Kes. 600,000. Any amount above this will be taxed in a graduated scale as per below table. The tax percentage is based on whether the withdrawal is at the time of retirement or an early withdrawal.
Upon exit before attaining the minimum retirement age of 50 years, as per the RBA Regulations:
- a) A member can only access 50% of his/her total fund credit if the scheme is employer sponsored.
- b) The preserved pension balance can be accessed before attaining 50 years in special circumstances such as permanent emigration or on grounds of Invalidity.
Below is the withholding tax table applicable to amounts above the tax-exempt amount of
Ksh.600,000 both after attaining retirement age or in case of early withdrawal.
On retirement or after 15 years
Membership or 50 years of age or ill health
Early withdrawal before attaining retirement age.
10% on the first 400,000
10% on first KShs.288,000
15% on the next 400,000
25% on first KShs.100,000
20% on the next 400,000
30% on amount in excess of KShs.388,000
25% on the first 400,000
30% on over 1,600,000
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This article is written by our Principal Officer Winnie M., who has vast insurance knowledge spanning over 10+ years in the industry. You can write to her and/or share feedback via this email firstname.lastname@example.org