What is Code 3920 on a South African IRP5?
Your retirement fund withdrawal lump sum explained — when it applies, how the withdrawal tax table works, and why preserving beats cashing out.
3920Code 3920 is a lump sum withdrawal benefit from a pension, pension preservation, retirement annuity, provident or provident preservation fund — most commonly triggered by resignation, but also by transfer, divorce settlement, a housing loan repayment, emigration or visa expiry. It is taxed under the withdrawal lump sum table, which is far less generous than the retirement table used for retrenchment or retirement lump sums.
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What Code 3920 Means
Code 3920 records a lump sum withdrawal benefit — money you take out of a pension fund, pension preservation fund, retirement annuity, provident fund or provident preservation fund before you retire. The most common trigger is resignation and cashing out rather than preserving the fund, but SARS also uses this code for withdrawals following a fund transfer, a divorce settlement (a "clean break" allocation to a former spouse), a housing loan repayment made via the fund, emigration, or the expiry of a work visa.
This is distinct from a retirement or retrenchment lump sum. If you are retrenched, your severance benefit is reported under code 3901 and taxed under the more generous retirement lump sum table. Code 3920 applies when you are leaving voluntarily or under one of the other qualifying circumstances above, and it is taxed under a noticeably harsher table.
The withdrawal table (code 3920) and the retirement table (code 3901 and retirement itself) track your tax-free usage on a combined, lifetime basis. Using part of your R27,500 withdrawal allowance now reduces what is left for a future retirement or retrenchment lump sum, and vice versa — SARS treats every lump sum you have ever received as part of the same running total.
The Withdrawal Lump Sum Tax Table
Withdrawal benefits are taxed on a sliding scale, applied to your cumulative lifetime withdrawals:
| Cumulative withdrawal amount | Tax |
|---|---|
| R0 – R27,500 | 0% |
| R27,501 – R726,000 | 18% of the amount above R27,500 |
| R726,001 – R1,089,000 | R125,730 + 27% of the amount above R726,000 |
| Above R1,089,000 | R223,740 + 36% of the amount above R1,089,000 |
Worked Example — R150,000 Withdrawal
An employee resigns with R150,000 in their provident fund and decides to cash it out rather than preserve it. No prior withdrawals or retirement lump sums have been taken, so the full R27,500 threshold is available.
| Item | Amount |
|---|---|
| Gross withdrawal | R150,000 |
| Taxable amount (R150,000 − R27,500) | R122,500 |
| Tax (18% of R122,500) | R22,050 |
| Net amount paid out | R127,950 |
Worked Example — R800,000 Withdrawal
A larger fund value pushes into the higher brackets. This example shows a R800,000 withdrawal, again assuming no prior withdrawals.
| Item | Amount |
|---|---|
| Gross withdrawal | R800,000 |
| Base tax on R726,000 | R125,730 |
| 27% of the amount above R726,000 (R74,000) | R19,980 |
| Total tax | R145,710 |
| Net amount paid out | R654,290 |
In both examples the tax is withheld by the fund administrator before payout — SARS issues a tax directive first, and the fund pays out the net amount directly. Use our Provident Fund Calculator to see how your own balance projects if you preserve it instead.
Preserving Beats Cashing Out
Transferring your fund to a preservation fund, or to your new employer's retirement fund, is completely tax-free and does not trigger code 3920 at all — it is a fund-to-fund transfer, not a payment to you. Preserving keeps your R27,500 lifetime allowance intact for a future genuine need, and avoids losing years of compound growth on the amount you would otherwise have cashed out. Preservation is almost always the financially stronger choice, even when a cash withdrawal feels tempting during a job change.
Frequently Asked Questions
What does code 3920 mean on my IRP5?
Code 3920 is a lump sum withdrawal benefit from a pension fund, pension preservation fund, retirement annuity, provident fund or provident preservation fund. It applies when you take cash out of a retirement fund before retirement — most commonly on resignation, but also on transfer, divorce settlement, a housing loan repayment from the fund, emigration, or visa expiry.
How is a code 3920 withdrawal taxed?
Under the withdrawal lump sum tax table, not the more generous retirement table. The first R27,500 is tax-free — a lifetime limit, not a per-withdrawal or per-fund allowance. From R27,501 to R726,000 the rate is 18% of the amount above R27,500. From R726,001 to R1,089,000 it is R125,730 plus 27% of the amount above R726,000. Above R1,089,000 it is R223,740 plus 36% of the amount above R1,089,000.
What is the difference between code 3920 and code 3901?
Code 3901 is a retrenchment severance benefit, taxed under the more favourable retirement lump sum table (R550,000 tax-free for life). Code 3920 is a withdrawal — typically resignation, not retrenchment — taxed under the harsher withdrawal table (only R27,500 tax-free for life). The two tables share a combined lifetime tracking system: withdrawals under 3920 reduce the tax-free amount still available for a future 3901 or retirement lump sum, and vice versa.
Can I avoid tax on my code 3920 withdrawal?
Yes — by not cashing out. Transferring your fund value to a preservation fund, or to your new employer's retirement fund, is tax-free and does not trigger code 3920 at all. Only an actual cash withdrawal is taxed. Preserving is almost always the better financial choice, since cashing out early loses years of compound growth on top of the tax hit.
Does my R27,500 tax-free withdrawal amount renew?
No. The R27,500 threshold is a lifetime limit, shared across every withdrawal and retirement lump sum you ever receive from any retirement fund. Once you have used it — even from a small withdrawal early in your career — every subsequent withdrawal or retirement lump sum is taxed from the first rand under the applicable table.
Does code 3920 apply if I transfer my fund instead of withdrawing cash?
No. Code 3920 specifically covers cash withdrawal benefits. A direct transfer to a preservation fund or your new employer's fund is a separate, tax-free transaction and is not reported under code 3920 — the fund administrator handles it as a fund-to-fund transfer, with no lump sum accruing to you.