Retirement Annuity Season


As the financial year end of February is approaching, it is time to look at our current financial situation and optimize the tax breaks granted to us.

One of the most effective tools in tax planning is Retirement Annuities (RA’s). You can benefit from tax concessions by becoming a member of a retirement annuity fund and qualify for the following significant tax benefits:


  • The voluntary contributions you pay into a RA are tax-deductible, up to 27.5% or (R350 000) of taxable income (The so-called tax break of an individual). This means that the money you save in a RA can be considered in your income tax calculation and deducted from the tax you owe to SARS.
  • You do not pay tax on any interest or dividends you earn on your benefit in the fund. Any capital gains realised are also excluded from capital gains tax (CGT). This means you can benefit from tax-free investment growth, which will help towards increasing your fund benefit.
  • On retirement, up to R500 000 of your lump sum benefit can be tax-free, depending on previous lump sum withdrawals. The balance is then taxed according to the tax rates as per the retirement lump sum tax table.
  • There is no estate duty payable on a RA.

However is it still wise given the present political and economic situation in SA to contribute to a RA?

We understand where the main concerns come from:

  • Low growth of South African Equities last 5 years.
  • Prescribed Assets that can come into effect.
  • Uncertain future outlook for South African economy and political landscape.

Every person is different and need to have a personalised wealth plan in place.

With wealth planning you can’t follow a future scenario based on emotional discussions around a braai or on social media.

One of the main concerns for a RA is that you can only at the age of 55 have access to your RA funds. You however can have access to your RA when you financially emigrate to another country. If you emigrate and withdraw your RA you will be taxed at maximum 36% on the value bigger than R 990 000. If you earn more than R 423 000 a year you will be taxed 36% and up to 45% on earnings above R 1.5 million.

Please contact Bovest if you have any questions.

PJ Botha CA(SA)

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