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Retirement savings / annuity

What is a Retirement Annuity?

In basic terms, you contribute a chosen monthly amount until you reach retirement age, which can be from the age of 55. Your contributions are allocated to a suite of investment portfolios that offer substantial long-term growth. You will have access to the money from when you reach retirement age, which means planning today, will help you get ahead and stay ahead.

Speak to your Broker who’ll help you to focus on the things you’d rather be doing by taking away the worries of retirement. With a Retirement Annuity we’ll help you to structure a long-term plan that not only secures your future, but allows you the freedom to focus on the present.


An RA is nothing more than a one-person pension plan.
You apply to become a member of an RA fund, which is approved as such by the Registrar of Pension Funds and the tax authorities.
No employer/employee relationship is required to qualify for membership.

RAs are the main savings vehicle for self-employed persons to accumulate funds for retirement in a tax-efficient way.
They are also popular as a top-up plan for salaried employees who belong to pension funds to close the income gap at retirement.

Smaller employers often choose RAs for their staff over traditional pension schemes, thereby avoiding the administration and responsibility involved in operating the latter schemes.


You know that contributions to an RA are tax-deductible up to a certain maximum, but do you know that an RA may actually provide you with an opportunity to save tax in 10 different ways?
These tax concessions apply to all natural persons , including each married spouse in their own right and are as:

Contributions are tax-deductible up to a certain maximum (e.g. if you fall in the 40% maximum marginal tax rate, then the Receiver is sponsoring almost half of your contribution towards your retirement). For example, a self-employed person with a taxable income of R200 000 for the year can contribute R30 000 to an RA on a tax-deductible basis and thereby save R12 000 in tax.

Disallowed contributions can be carried over to the next year of assessment and, if unused during the total contribution period, can be offset at retirement to increase the tax-free portion of the lump sum, the annuity or other income.

The inside build-up of the fund is currently taxed at 9% on gross interest. This benefits anybody who pays income tax! If you have an all-equity RA no tax will be paid on the build-up, as dividend income and capital appreciation are tax-free.This is like having a tax-deductible share portfolio.Currently, RA’s are NOT subject to CGT.

Your lump sum on death or retirement is tax-free up to R300,000

The balance of the tax-free lump sum is taxed very favourable rates.

You can deduct a further R1 800 per year in respect of arrear contributions. All that is required to increase your deduction is to make an additional contribution of R1 800 in respect of a previous tax year in which you didn’t claim your maximum allowable deduction. This extra contribution of R1 800 can then be claimed during the current tax year. This procedure can be repeated year after year in respect of years in which you didn’t claim the full deduction.

On death, any benefits paid out by way of an annuity are free of estate duty. (This provides a planning opportunity for the wealthy estate owner to make a large single-premium contribution to an RA to reduce his or her estate for duty purposes.)

If you leave your employer and receive a withdrawal benefit from your pension or provident fund, you can preserve your retirement benefit transferring it into an RA fund tax-free.

At retirement, you have a choice between a conventional annuity or an equity-linked living annuity. Assuming your risk profile justifies the decision, by choosing the equity-linked living annuity you can manage the income you receive (between 5% and 15% of the capital amount each year) and consequently also manage your income tax position.

Most people experience a big increase in medical expenses once they retire. Thankfully, once you have reached age 65, your medical expenses become fully tax-deductible. An RA can be used to build up a fund for post-retirement medical expenses in a tax-efficient way. At retirement, although the annuity is fully taxable, to the extent that it used to cover medical expenses it is deductible again. It is therefore, in essence, tax-free.