Section 10C: Tax Free Retirement

Ruvan J Grobler • March 19, 2025

Saving for retirement has become somewhat unappealing for many investors. This is due to the lack of flexibility and many moving parts that make it complex. Treasury has been trying to combat the flexibility issue with the introduction of the two-pot system in September 2024. These structures do however have major tax advantages.

 

According to Section 11F of the Income Tax Act, you are allowed to deduct annual contributions made to any pension fund, providend fund or retirement annuity fund. The annual limits are set out as follows to the lesser of:

(i) R350 000;
(ii) 27,5% of the higher of –

remuneration; or
taxable income; or

(iii) taxable income of that person before –
including any taxable capital gain.

 

According to the provisions set out in Section 10C of the Income Tax act, contributions from previous years that were not deductible at the time will be carried forward to the current assessment year unless they were deducted from a retirement fund lump sum, withdrawal benefit, or offset against a compulsory annuity. Arrear contributions are added to the current year's contributions and treated accordingly.

 

Ultimately, these disallowed contributions can be used to offset retirement income until the rollover is depleted. Because it is seen as a deduction against gross income, planning can be done in such a way that no income tax is payable for many years into retirement. The disallowed contribution can also be used to increase the tax-free portion of your 1/3 allowable retirement lump-sum.

 

Important Considerations

Upon the investor’s death, the beneficiaries of the annuity will have a choice. They may either take their portion in cash and pay the withdrawal tax, or they can proceed with the annuity. If they decide to take their portion in cash, that portion of the annuity will unfortunately be included in the estate. This consideration will make disallowed contributions less attractive for investors with offshore beneficiaries.

 

Ruvan J Grobler RFP™ (PGDip Financial Planning)


By Bovest April 4, 2025
The widely anticipated tariffs were announced last night via executive order, on America’s so-called ‘Liberation Day’ and in discussions with our partners at Morningstar, the following should be noted. The sweeping announcement is intended to ‘make America wealthy again’ as tariffs effectively tax foreign producers on their imported goods, as a percentage of their value. The US is currently the largest goods importer in the world and is currently running a trade deficit (imports more than it exports). President Trump has said that he will not negotiate, however, if countries are willing to lower their charges on US goods, the White House will reduce the rate in effect. Market impact US Equities have sold off sharply, particularly those reliant on imported goods, as well as foreign companies that have significant exposure to the US market. At the time of writing, the FTSE 100 was down 1.4% to below 8,500, whilst sterling had appreciated to 1.32 against the dollar. Bond prices have broadly risen as investors have sought perceived safer assets. SA equities and bonds responded negatively after markets opened. The All-Share was down around -3,5% by end of-day with the decline being led by Financials at -4.3%, while both Resources and Industrials were down approximately -2.4%. The yield on the SA 10-year government bond spiked sharply to 11.3%, a move of 0.8% off the previous day's close. The rand remains relatively range-bound between R18.60 – R18.80 despite general US dollar weakness against most major currencies. What we know about the Tariffs: The tariffs that were imposed last night are of a reciprocal nature, meaning that countries are free to retaliate with their own tariffs on the US. Below are some of the standout tariffs that Trump has imposed across the globe: · China 34% · India 26% · Japan 24% · EU 20% · UK 10% South Africa, which currently applies 60% tariffs on the US, was handed a 30% reciprocal tariff. The effective rate is likely to be lower given that key commodity exports, including gold and platinum, are currently exempted. What we don’t know President Trump has not made it clear whether the tariffs will remain in place indefinitely and whether indeed they will remain at the initial level. There are many factors that could impact their longevity, including legal ramifications and future election implications. It is also yet to be seen how and when other countries will react to these changes. Countries may look to increase their current tariffs on the US or indeed may consider reducing them. Additionally, President Trump has stated that the only way to gain exemption from the tariffs is to set up factories and build products in the U.S., so we await to see how countries and companies react to this proposition. What’s next? While volatility and policy uncertainty will likely persist in the short term, we recommend investors keep a cool head. The challenge is to avoid overreacting to the elevated day-to-day volatility and remain focused on your financial plan. Central Banks have been in a holding pattern in anticipation of actions taken by President Trump, and therefore this announcement may have an impact on future Central Bank policy and interest rates. From a longer-term perspective, we may see implications for economic growth across various regions, however, it is too early to tell at this stage. From an investment standpoint, we continue to focus on the fundamentals, maintaining a long-term mindset, whilst paying attention to valuations. Market volatility can provide investors an opportunity to rethink their portfolios and find some better-valued investments with more attractive returns, however, it’s important to note that while selloffs will produce bargains, investors shouldn’t buy simply because stocks look less overvalued. Investment is always full of uncertainty, and therefore the Bovest solutions are constructed with this in mind. Valuations are key in our decision-making process, whereby our research process identifies return drivers from oversold assets, offering investors a high margin of safety. Against that, we also hold defensive assets that can add ballast to portfolios during periods of turbulence, including high quality government bonds and defensive equities such as consumer staples. Diversification continues to be a strong portfolio strategy in these times of uncertainty. Regards,  The Bovest Team
By Riaan Botha April 3, 2025
Inleiding Aftrede is onteenseglik ’n belangrike fase in ons lewens, en waarskynlik die belangrikste. Dit is die kulminasie van voorafgaande fases, soos opleiding en inkomsteskepping, en as ons nie gereed is vir hierdie fase nie, kan die lewe traumaties wees. Aftrede verg beplanning en beplanning is die gevolg van goeie gewoontes. Ons raad aan afgetredenes en mense wat beplan om af te tree, is om goeie gewoontes te kweek om hulle op die pad na ’n gelukkige aftrede te lei. Uit ons interaksie met kliënte wat op aftrede staan of reeds afgetree het, kon ons sien dat hierdie benadering prakties en logies is, met positiewe, tasbare gevolge. Baie faktore speel ’n rol in ’n gelukkige aftrede. In die VSA het ’n studie hierdie faktore gelys as goeie gesondheid, finansiële sekuriteit, liefdevolle familie en vriende en ’n doelgerigte of beplande aftrede - What Retirees Want. Dychtwald and Morison, 2022. p115. Hierdie aspekte word onder meer in hierdie boek aangespreek. By Bovest word kliënte se persoonlike omstandighede in ag geneem wanneer hulle finansiële advies vra. Ons wil mense help om hul finansiële situasie ten beste te benut om gelukkig te kan leef. Om gelukkig af te tree is egter nie ’n gegewe nie. Jy benodig persoonlike doelwitte wat opgevolg moet word met die begeerte om die nodige regte gewoontes aan te leer. Dit vereis dikwels dat jy bereid moet wees om van jou gevestigde gewoontes te verander. In die soeke na jou persoonlike geluk gaan jou gewoontes uniek wees. Hoe word Gewoontes Gevorm? Daar bestaan verskillende teorieë oor hoe om gewoontes suksesvol te vorm. By Bovest vind ons aanklank met James Clear se teorie soos vervat in sy boek Atomic Habits (Penguin Random House, London, 2018, pp47-48), wat vier stappe tot sukses verwoord: Stap 1: Raak bewus van ’n wenk, insig, doelwit of begeerte. Stap 2: Hunker om dit uit te voer. Stap 3: Wat is die reaksie wanneer jy dit uitvoer? Stap 4: Wat is jou beloning as jy dit uitvoer?  Kom ons kyk na’n voorbeeld van gewoonte-vorming: · Stap 1: Iemand wat aftree se doelwit is om waarde vir geld te soek – hulle ontleed voortdurend die omgewing waarbinne hulle leef en pas hul begrotings en maandelikse uitgawes oppersoonlike behoeftes voortdurend aan. · Stap 2: Daar word navorsing gedoen oor watter uitgawe die beste waarde vir die beskikbare geld bied. · Stap 3: Die aankope word aangepas en die afgetredene voel tevrede dat daar waarde vir geld verkry is. · Stap 4: Aangesien daar binne begoting opgetree is, is die beloning dat daar fondse beskikbaar is om op ander beplande aankope te spandeer. Indien die koop ’n winskoop was, kan ons daarmee spog en selfs deur ons vriende geprys word as ’n winskopie-jagter! Deur hierdie vier stappe te herhaal, sal ons in die toekoms met meer gemak optree tot gewoontes van gesonde finansiële bestuur redelik moeitevry gevorm word.