Investments
Retirement annuities
A retirement annuity is a long-term investment meant for the years after you stop working. The money is invested, the rules limit when you can take it out, and contributions can qualify for a tax deduction within limits set by SARS.
What people use it for
An RA is one way to build an income for later life, especially if you do not belong to an employer fund, or you want to add to one. It is not a short-term savings account. You should be comfortable leaving the money until retirement age, within the rules of the fund and the Income Tax Act.
At retirement, the law sets how much you may take in cash and how much must be used to provide an income. Those rules change from time to time. We will talk about the rules that apply to you, rather than a rule of thumb from a website.
Tax, in plain language
Contributions to retirement funds can qualify for a deduction. For several years the deduction has been limited to the lesser of a rand cap and 27.5% of the higher of remuneration or taxable income. The rand cap has been R350,000 a year. Confirm the current limit with SARS or a tax practitioner before you rely on it. This is general information, not tax advice.
Growth inside the fund is treated differently from growth in a flexible investment. That is one reason people compare an RA with a tax-free savings account rather than assuming one replaces the other.
How we help
We help you compare RA options on the points that change the outcome for a family:
- How long you can leave the money
- What the fees are, and where they are disclosed
- Which funds are available, without treating past performance as a promise
- How the RA sits next to an employer fund or a tax-free savings account you already have
General information only. This page is not personal advice and it is not an offer. Product rules, tax and your own circumstances decide what is suitable. Read the official documents before you decide.
Questions we hear
Can I take the money out early?
Retirement annuities are built to be locked in until retirement, with limited exceptions set out in law and in the fund rules. Do not use an RA for money you may need for a house deposit or an emergency. Ask us to explain the access rules before you contribute.
Are contributions tax deductible?
They can be, within the limits in the Income Tax Act. Those limits have a percentage and a rand cap, and they can change. A deduction is not the same as a gift: the tax treatment at retirement also matters. Confirm the current rules before you decide.
Is the growth guaranteed?
No. Most retirement annuities are market-related. The value can fall. A guarantee, if a product offers one, will be written into that product’s documents and will have a cost. We will not imply a return on this page.
Related
Tell us what you are planning for
A quote, a question, or a look at the retirement illustration. We reply from matt@ncj.co.za. What you read here is general information, not personal advice.