---
title: "Mitigating the tax hike after adding your deceased spouse’s pension to your income"
description: "Question: My husband passed away last year, and I receive a pension from his old company. This pension is one of those fixed pensions with annual increases that I will receive for the rest of my life. I am 55 years old. I recently did my income tax return and was shocked to see that when I add his pension to my salary, my tax rate will increase by 10%. What can I do?"
type: "NewsArticle"
publisher: "Daily Maverick"
site: "https://www.dailymaverick.co.za"
section: "THE FINANCIAL WELLNESS COACH"
author: "Kenny Meiring"
author_url: "https://www.dailymaverick.co.za/author/kenny-meiring/"
canonical_url: "https://www.dailymaverick.co.za/article/2023-02-16-mitigating-the-tax-hike-after-adding-your-deceased-spouses-pension-to-your-income/"
published: "2023-02-16T20:48:07"
lang: "en-ZA"
word_count: 439
---

# Mitigating the tax hike after adding your deceased spouse’s pension to your income

> Question: My husband passed away last year, and I receive a pension from his old company. This pension is one of those fixed pensions with annual increases that I will receive for the rest of my life. I am 55 years old. I recently did my income tax return and was shocked to see that when I add his pension to my salary, my tax rate will increase by 10%. What can I do?

By Kenny Meiring · Published 16 February 2023, 22:48 SAST

## Key points
- A widow recently found out that her husband's pension income will be taxed in her name, resulting in a higher marginal tax rate. While it is difficult to reduce taxable income while still receiving a salary, she can contribute up to 27.5% of her income to a retirement annuity which can reduce her tax bill. This is a clever way to save money and become more financially secure. For advice on the best financial solution, it is recommended that the widow consults a financial planner who will be able to devise an optimal plan.
- An additional income from a spouse’s pension can increase your marginal tax rate.
- Investing in a retirement annuity can reduce your taxable income and save you money.
- You can contribute up to 27.5% of your taxable income to a retirement annuity.
- Consult a financial planner to devise the best solution for reducing your tax bill.

## Content

**Answer:**In the past, there were two taxpayers in your household and now there is only one. This will result in any additional income that you receive from your husband’s pension being added to your income, increasing your marginal tax rate.

I do not have enough information on your situation to give you a categorical answer on what you can do, but I will run through an approach that I would have followed.

I would try to reduce your overall taxable income by as much as possible. This is difficult while you are receiving a salary, as your options to reduce your income will be limited. Once you retire, you will be able to choose a lower drawdown rate on your annuity and reduce your tax bill.

At this stage of your life, the only option open to you is to invest in a retirement annuity. You are allowed to contribute up to 27.5% of your taxable income to a retirement annuity. This amount will come off your taxable income.

I will give you a simplified example below to help you understand how this could work:

Assume that you earn R300,000 a year and the spouse’s pension that you receive comes to R200,000 a year.

- Before your husband passed away, your tax bill would have been **R43,495**.
- Now that you receive the additional spouse’s pension, your tax bill increases to **R103,402**.

You may invest 27.5% of the R500,000 income that you receive into a retirement annuity. This comes to R137,500.

- This investment will reduce your taxable income from R500,000 to R362,500. And your tax bill would drop to **R60,214**.

Your investment of R137,500 would give you an immediate saving in tax of R43,188. This is a very clever way of reducing your tax bill and improving your overall financial wellness.

Funding this can be a challenge. If you received a cash payout as part of your husband’s group life scheme, then you could use some of this to invest in retirement annuities until such time as you retire and have more control of your income flows.

I would, however, strongly recommend that you consult a financial planner who will be able to devise a solution for you that will result in you paying the least amount of income tax, while at the same time ensuring your current and future financial security. **DM/BM**

*Kenny Meiring MBA CFP is an independent financial adviser.*

*You can contact him on 082 856 0348 or at*[*Financialwellnesscoach.co.za*](http://www.financialwellnesscoach.co.za/)*. Please send your questions to*[*kenny.meiring@sfpwealth.co.za*](mailto:kenny.meiring@sfpwealth.co.za)

*This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.*

![Image](https://www.dailymaverick.co.za/wp-content/uploads/2023/02/DM-11022023-001.jpg)