Retirement Annuity

Long-term savings plan

What is a Retirement Annuity ?

A Retirement Annuity (RA) investment is a long-term savings plan designed to help individuals save for their retirement. In South Africa, Retirement Annuities are a popular type of investment product that provide tax benefits and a disciplined savings plan to help individuals plan for their retirement.

With a Retirement Annuity, individuals make regular contributions over a fixed period of time, typically until they reach retirement age, and the funds are invested in a portfolio of assets, such as stocks, bonds, and cash, selected by a professional fund manager. The investment returns generated over time can help grow the value of the investment and provide a nest egg for retirement.

How much can you save?

The contribution to pension, provident and retirement annuity funds are deductible but limited to lesser of: R350 000.00

27,5% of greater of: Remuneration( excluding retirement, withdrawal or severance lumps sums) Taxable income ( excluding retirement, withdrawal or severance lumps sums) Prior to the deduction of donations and foreign tax. Taxable income ( excluding retirement, withdrawal or severance lump sums and taxable capital gains) prior to the deduction of donations and foreign tax.

Retirement Annuities (RAs) work as follows:

Contributions

An individual makes regular contributions to their Retirement Annuity over a fixed period of time, typically until they reach retirement age. The contributions are tax-deductible up to a certain limit, and can be adjusted annually based on changes in income or personal circumstances.

Investment

The funds contributed to the Retirement Annuity are invested in a diversified portfolio of assets, such as stocks, bonds, and cash, selected by a professional fund manager. The investment returns generated over time can help grow the value of the investment and provide a nest egg for retirement.

Tax benefits

Contributions made to a Retirement Annuity are tax-deductible up to certain limits, and investment returns earned on the investment are tax-free. This can help individuals maximise their retirement savings and keep more of their money.

Vesting age

The vesting age of a Retirement Annuity is the age at which an individual can access the funds in their investment without penalty. In South Africa, the vesting age is typically 55 years old.

Payout options

At the vesting age, an individual can choose to take a lump sum payout, an annuity income stream, or a combination of both. The lump sum payout is tax-free up to certain limits, while the annuity income stream is subject to income tax.

Portability

Retirement Annuities are portable, meaning that an individual can transfer their investment to a new provider if they choose to do so.

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