One of the many services offered by PATC is assistance with Retirement Annuity Tax. While planning for retirement is something that every South African should be considering, the shocking reality is that only nine in every 100 South Africans have made adequate provisions for retirement. When the time comes for you to retire, how well you plan for your future will directly affect how comfortable you will be able to live once you have retired.
Retirement Annuity Tax offers an effective long-term investment product. Many self-employed people use this as a retirement savings tool, while those employed at a company often use it to supplement their company pension or provident fund. The main benefits and criteria of Retirement Annuity (RA) include the following:
- In the case of self-employed persons, the limit is 15% of taxable income. For employees, it is the greatest of the following: R1 750 or R3 500 less the tax deductible contributions to the employee’s company pension fund, or 15% of non-pensionable earned income.
- Up to certain limits, your contributions for Retirement Annuity are tax deductible, meaning that the government sponsors RA to a certain degree.
- If you invest up to the limits above, you will get the most benefit as the investment returns will be worthwhile. However many accountants in South Africa advise against contributing more than the tax deductible limit, as it would be more worthwhile to invest the overflow into a higher-performing and more flexible type of financial plan.
- You are also permitted to deduct the disallowed portion of the current tax year’s contributions in future tax years.
- You are also able to deduct up to R1 800 each year for contributions paid to reinstate a lapsed Retirement Annuity policy.
- Contribution options include one-off lump sums called a single premium policy, or recurring contributions made at regular intervals.
- A number of portfolios can be considered, including equities and unit trusts as well as foreign assets and a balanced portfolio.
- You will only be able to access your Retirement Annuity at the age of 55, shortly before retirement.