Many South Africans may be wondering how to make the most of their retirement annuity, especially as the end of the tax year approaches.
South African residents and ex-pats have until the 28th of February to take advantage of a government incentive aimed to encourage them to save for their retirement using a retirement annuity (RA).
Retirement annuities in South Africa are one of the few regimes which allow you to save for your retirement while paying less tax.
Therefore, taking advantage of this incentive should be something that all South Africans should do. When making use of this incentive, you can:
Any individual who pays tax to the South African Revenue Service (SARS) can benefit from an RA. This includes:
Currently, the South African Government allows you to make a tax-free, annual contribution towards your RA of up to R350 000.
This can be done throughout the year in the form of monthly installments, one single lump sum per year or on a quarterly basis, for example.
In addition, Regulation 28 of the Pension Funds Act limits your potential exposure to riskier asset classes.
Individuals may also contribute more than the limit of 27.5% of their income to their RA, without being penalised by SARS.
Using an RA to save your money can provide both long- and short-term benefits which include but are not limited to:
These benefits highlight not only the importance of having a retirement annuity but also why you should try and contribute as much as you can before the end of the tax year.
Saving for the future is something that everyone should do and it’s never too late to start. Our financial advisors are able to assist you with your financial planning process and it’s our aim to help you make the most of your contributions.
For more information about the tax incentives you can enjoy when investing in a retirement annuity, or to speak to one of our advisors, please contact us.
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