Retiring or Resigning as a South African Public Employee:
Your Options, Risks and Smart Choices

A practical guide for government employees on pensions, lump sums and how to avoid going broke after a lifetime of service.

For public servants in South Africa, the decision to retire or resign is one of the biggest financial choices you will
ever make. It doesn’t just decide when you stop working – it determines whether you will live with dignity, or spend
your older years stressed, in debt and dependent on others.

Most government employees – teachers, nurses, SAPS members, correctional services officials, municipal staff and many
others – belong to the Government Employees Pension Fund (GEPF), one of the largest pension funds in Africa. Because
it is a defined benefit fund, your decisions at exit (retirement vs resignation, lump sum vs pension, preserve vs cash
out) have long-term consequences that you cannot undo later.

At the same time, media reports and retirement surveys repeatedly show that many South Africans reach retirement age
and discover they cannot afford to stop working. Some retirees run out of money within a few years because of poor
choices, debt, or pressure to support extended family. This article explains your options, why people retire and end
up broke too quickly, and what you can do differently to protect yourself.

1. Understand Your Starting Point: How GEPF Works

The Government Employees Pension Fund is a defined benefit fund. That means your benefit at
retirement is based on a formula that considers your years of pensionable service and your final salary, rather than
only how the markets performed. This is a huge advantage compared to typical private funds.

In simple terms:

• The normal retirement age is usually 60.
• You may take early retirement (for example from age 55), but your benefits can be reduced.
• If you have 10 or more years of pensionable service when you retire, you normally qualify for a lump sum gratuity plus a monthly pension for life.
• If you have less than 10 years’ service, you generally only receive a lump sum – no monthly pension.

GEPF also provides spouse’s and children’s pensions and certain death benefits. These features protect your loved ones
if you pass away, and they are one reason why preserving your membership and choosing retirement over resignation is
often the more sensible option.

2. Retirement vs Resignation: Two Very Different Paths

When you leave the public service, you usually do so in one of two ways:

• Formal retirement – normal, early, or ill-health retirement.
• Resignation – leaving before retirement and taking a resignation benefit.

2.1 Retiring from GEPF

If you retire with 10 or more years of service, your benefit is typically split into:

• A once-off lump sum gratuity (often about one-third of your value by default).
• A monthly pension for life (based on the remaining value).

Some categories of employees may choose between different benefit structures (slightly larger lump sum with smaller
pension, or smaller lump sum with higher pension). Once you make this election and your benefits are paid, it is
generally final and cannot be changed later.

Advantages of retiring (instead of resigning):

• You secure a guaranteed monthly income for life.
• Your spouse and children may qualify for pensions if you pass away.
• You avoid the temptation of spending your entire pension at once.
• You keep some protection against inflation through pension increases.

2.2 Resigning from the Public Service

If you resign, are dismissed, or leave before retirement age, your payout is called a resignation benefit.
In practice, you have two broad options:

• Take your benefit in cash – you receive a lump sum after tax. This may look attractive, but the tax can be heavy and your retirement savings are wiped out.
• Transfer your benefit to a preservation fund or retirement annuity – your money stays invested for retirement and you avoid an immediate tax hit.

Many people resign simply to access cash, often to pay off debts, build a house, or start a business. Media articles and
Treasury warnings have stressed that this is one of the biggest reasons so many former public servants end up in
financial trouble later in life.

3. Why So Many Retirees Run Out of Money Too Quickly

Despite being members of a strong pension fund, many former public employees find themselves broke within a few years
after leaving service. Common reasons include:

3.1 Cashing Out Pension Savings on Resignation

Large sums of money are tempting. Many people resign, take their full benefit in cash, pay heavy tax, and then use what
is left to clear debt, build or extend a house, or fund a business. When the money is gone, there is no monthly
pension, no backup, and no realistic way to replace decades of contributions.

3.2 Supporting Too Many Dependants and Debts

Many South African retirees still support adult children, grandchildren and extended family, and continue servicing
personal loans and credit cards. A pension meant for two people is forced to support five or six. Without boundaries
and a proper budget, even a decent pension is quickly overwhelmed.

3.3 No Real Retirement Plan

Most people have never calculated how much income they actually need in retirement, how long their money must last, or
how inflation will erode their purchasing power. Decisions are made based on emotion (“the lump sum looks big”) instead
of maths (“Will this still support me in 15 years?”).

3.4 Underestimating Inflation and Life Expectancy

Retirement can easily last 25–30 years. Prices of food, electricity, transport and medical aid keep climbing. If you
draw too much from your savings in the first 5–10 years, you may have nothing left when you are older and more
vulnerable.

4. More Reasonable Choices for Most Public Employees

Every person’s situation is unique and proper financial advice is essential. However, certain choices tend to be safer
and more reasonable for the majority of public servants.

4.1 Avoid Resigning Just to Access Cash

Unless you have strong professional advice and a clear long-term plan, resigning purely to get a lump sum is usually a
serious mistake. You give up your guaranteed pension and transfer all the risk of investing and budgeting onto
yourself. If you must leave before retirement age, strongly consider preserving your benefit in a retirement or
preservation fund rather than taking it in cash.

4.2 Use GEPF as Your Core Pension

For many, the best strategy is:

• Work as long as reasonably possible, ideally up to normal retirement age.
• Retire from GEPF and take a balanced combination of lump sum and monthly pension.
• Use the GEPF pension as your “non-negotiable” income for life, and build extra flexible savings while you are still working.

4.3 Be Cautious with Living Annuities and Big Investments

If you move retirement money into a living annuity or other private investments, remember that you bear the investment
risk. Drawing a high percentage each year or making speculative investments can wipe out your savings. For many
GEPF members, a combination of a secure GEPF pension and a smaller, carefully managed private annuity or investment
account works best.

4.4 Plan for Your Partner and Dependants

Your decisions affect more than just you. GEPF pensions often include spouse’s and children’s benefits. If you cash out
or move everything into products that do not include these protections, your partner or children may struggle if you
pass away. Your plan should look at the whole household, not only your own income.

5. A Practical Roadmap from “Still Working” to “Retired and Secure”

10–15 Years Before Retirement

• Request your GEPF benefit statement and understand what you are on track to receive.
• Aggressively pay off high-interest debts (credit cards, personal loans).
• Start or increase contributions to private savings: tax-free savings accounts, retirement annuities, or unit trusts.
• Educate yourself about basic investing and retirement products.

5–7 Years Before Retirement

• Obtain projected benefits at different retirement ages (for example, retiring at 55 vs 60).
• Draft a realistic retirement budget, including medical aid and family support.
• Consider whether downsizing your home or relocating could reduce your future expenses.
• Start “test-driving” retirement by living on what your projected pension will be and saving the rest.

2–3 Years Before Retirement

• Consult a qualified financial planner who understands GEPF rules.
• Decide on normal vs early retirement, and on lump sum vs monthly pension structure.
• Update your will, beneficiary nominations and estate plan.
• Make sure your spouse or family know how to claim benefits if you pass away.

At and After Retirement

• Double-check every option before signing; many choices are final.
• Avoid major purchases or risky investments in the first year of retirement.
• Stick to a written budget, review it annually, and keep debt as low as possible.
• Be cautious of scams and “too good to be true” offers targeting pensioners.

6. Final Thoughts: Don’t Let a Lifetime of Service End in Poverty

As a public employee, you have something many people in the private sector do not: membership of a large, stable,
defined benefit pension fund. But even the best pension fund cannot protect you from poor decisions. Resigning for
quick cash, overspending lump sums, supporting too many dependants without boundaries and ignoring inflation can undo
30 years of hard work in just a few years.

The most reasonable path for most public servants is to protect the GEPF pension, avoid unnecessary withdrawals,
prepare early, reduce debt and make decisions that prioritise long-term dignity over short-term excitement. Your
future self – and your family – will thank you for the discipline you show today.

You worked hard for your pension. Make sure it works hard for you in return.

Frequently Asked Questions (FAQs)