7 Essential Things to Know about Retirement Annuities (RAs) in South Africa

  1. Retirement Annuities (RAs) are a popular option for retirement planning in South Africa, providing a tax-efficient savings and investment vehicle that can help secure your financial future.
  2. RAs are governed by Regulation 28, which places limits on the extent to which these funds can be invested in specific asset classes, requiring adherence to stringent guidelines to ensure that the funds are invested according to the investor’s risk profile and investment objectives.
  1. RAs offer a range of investment options, including equity funds, balanced funds, fixed-income funds, and money market funds. Choosing an investment strategy that aligns with your risk profile and investment goals is essential.
  2. Contributions to RAs are tax-deductible, allowing you to save for retirement while reducing your taxable income. You can contribute up to 27.5% of your annual taxable income or R350,000 per annum, whichever is lower, to an RA.
  3. RAs are subject to fees, which can have a significant impact on the performance of the RA. Choosing a provider that offers competitive fees is crucial to ensure that your retirement savings grow as much as possible.
  4. The growth on your investment is tax free and your retirement annuity is protected from creditors.
  5. When withdrawing from RAs after the age of 55, you can withdraw up to one-third of the value of your RA tax-free. The remaining two-thirds must be used to purchase a life annuity or invested in a living annuity.It’s important to consider the impact on your retirement income when making withdrawals and to review the terms and conditions of your RA contract before making any decisions.