• Intro
• Products
• Retirement Annuities
• Preservation Funds

General Rules Applicable to Retirement Annuities

• Contributions are Tax Deductible within certain limits

  The government provides a major incentive to us to invest in our retirement by providing tax benefits on contributions we make. Historically, up to 15% of your annual earnings has been allowed to be invested for retirement and not be taxed as current income. Together with the tax benefits you receive on you retirement investments themselves, this makes a compelling case to maximise your retirement savings.
  
  Note that the 2007 budget has announced some changes to the tax deductible contribution limits, and to the tax applied within retiremnet funds. Please see Questions and Answers for more details.

• Tax on Investment Returns

  The investment return realized on the funds in your retirement annuity is made up of a combination of capital gains, dividends and interest. The taxable growth (interest and net rental portion and foreign dividends) received by the fund is subject to Retirement Fund Tax and not your marginal tax rate. This tax is subtracted by the administrator of the Retirement Annuity Fund on an annual basis and paid over to SARS.
  Retirement funds are not subject to capital gains tax.

  See Questions and Answers for more details.

• Accessing your Investments

  Money invested in a Retirement Annuity will not be accessible to the fund member until the member reaches the retirement age of 55. Previously, members of retirement annuity funds were required to retire at the age of 70. However, recent amendments to the income tax act abolished the maximum retirement age. The consequences of this are wide ranging; a member need not ever retire from an RA. The only exception to this rule is if you are permanently disabled due to injury or illness. The trustees of the Retirement Annuity Fund will require proof of your ill-health or disability.

• Withdrawal of funds at retirement

  At retirement, members of a Retirement Annuity Fund are generally permitted to take up to one third of the accumulated benefit as a cash lump sum, a portion of which is tax free.

  Your RA lump sum is added to the cash payout from your pension or provident fund, and the standard tax formula is applied (broadly the current tax-free portion is R300 000)

  The tax free portion depends on how long you have been in the fund. The balance of the lump sum that you withdraw is fully taxable at the higher of the average tax rate paid by you in the tax year of your retirement or the preceding tax year. The tax-free amount is a once-off benefit irrespective of the number of retirement products you own.

  The balance of the capital in your retirement annuity fund must be invested in a pension providing vehicle such as a living annuity No tax is payable on the transfer of the money into a living annuity.

• Cessions

  Any funds in an RA are protected from creditors, as specified by the Pension Funds Act. Furthermore, you may not cede your investment in your Retirement Annuity Fund, use it for security for a personal debt or take a loan from the fund.

• Death Benefits

  Your dependants and not necessarily your nominated beneficiaries have the first right to the benefits of your Retirement Annuity. On your death your dependants may, within six months of your death, take a portion of the capital in your retirement annuity as cash.

  This amount is limited to an amount calculated as follows:

  • Contributions paid + 7% per annum compound, in addition to one third of the balance.
  This amount may be taken as a lump sum, while the balance of the Retirement Annuity is required by law to be used to buy a regular annuity for the use of your dependants.