Retirement annuity

Retirement annuity is an important tool in one's retirement planning and tax planning, especially for high-income earners.

A retirement annuity encourages you to save for retirement by offering the following tax savings:

•Contributions are tax deductible subject to a maximum of the greater of

•15% of your non-retirement funding income. Non-retirement funding income refers to that part of your taxable income that is not taken into account when calculating contributions made to a pension or provident fund by you or on your behalf by your employer. Variable income such as commission and bonuses is typically non-retirement funding; or

•R3,500 minus allowable pension fund contributions; or

•R 1,750.
•At retirement, accumulated capital in the retirement annuity taken as cash will be taxed based on a simplified sliding scale:

- The first R500 000 will be tax-free, thereafter,

- R500 001 - R700 000 will be taxed at 18%;

- R700 001 - R1 050 000 thereafter will be taxed at 27%;

- Lump sum amounts above R1 050 000 will be taxed at 36%.

At least two thirds of the capital must be invested in a pension-providing vehicle such as a living annuity or a guaranteed life annuity. No tax is payable on the transfer into the living annuity.

The annual pension received after retirement is taxed at your marginal tax rate. Your marginal tax rate after retirement is typically lower than your marginal tax rate before retirement.

The capital in a retirement annuity cannot be withdrawn prior to retirement. However, should you emigrate, you may apply to the South Africa Reserve Bank to withdraw the full amount.

The minimum investment is R20,000 for initial lump sum investment or R500 for monthly contribution.

Interested in starting a retirement annuity, or would like to review your retirement planning? Please fill in the form below, we will contact you.