What is a Retirement Annuity?

A Retirement Annuity (RA) is a long-term investment designed to help individuals save for retirement in a tax-efficient way. Unlike employer-sponsored pension or provident funds, a Retirement Annuity is a personal retirement savings plan that allows you to invest independently. Contributions are usually locked in until the official retirement age of 55, ensuring disciplined savings.

What Happens If I Die Before Retiring?

Your Retirement Annuity is transferred to your beneficiaries, who may:

• Take a lump sum payout (subject to tax)
• Transfer it to their own retirement savings
• Use it to purchase an annuity income

Any Risks with Retirement Annuity?

• Market fluctuations can affect investment returns
• Limited liquidity, as funds are locked until retirement age
• Inflation risk, requiring a well-balanced investment strategy

Is it worth having a Retirement Annuity?

Yes, a Retirement Annuity offers several advantages:

• Tax benefits – Contributions are tax-deductible (up to a limit), reducing your taxable income.
• Investment growth – Funds grow tax-free, with no capital gains tax, dividend withholding tax, or income tax on returns.
• Retirement security – Encourages long-term savings discipline, ensuring financial stability at retirement.
• Diversification – Provides access to a variety of investment options to grow your wealth over time.

Can I invest offshore using my retirement annuity?

Yes, Regulation 28 allows up to 45% offshore exposure in retirement funds

Do I pay tax on my Retirement Annuity?

• Contributions – Tax-deductible up to 27.5% of your taxable income, capped at R350,000 per year.
• Investment growth – Grows tax-free inside the Retirement Annuity.
• Withdrawals at retirement – The first R550,000 of a lump sum is tax-free, but anything above that is taxed on a sliding scale. If you buy an annuity, your monthly pension income is subject to PAYE (Pay As You Earn) tax.

How Do I Ensure My Retirement Annuity Performs Well?

• Diversify your investment portfolio
• Review and adjust your asset allocation
• Consider offshore exposure for currency protection
• Regularly monitor fund performance

Understanding your Retirement Annuity options ensures you make informed decisions for long-term financial security.

What Happens to My Retirement Annuity If I Emigrate?

If you formally emigrate and become a non-tax resident, you may apply to withdraw your RA in full, subject to tax regulations.

How Does a Retirement Annuity Compare to a Preservation Fund?

• Retirement Annuity: Ongoing tax-deductible contributions until retirement
• Preservation Fund: A once-off transfer of existing retirement savings with one early withdrawal option

Is a Retirement Annuity Better Than a Pension Fund?

It depends on your needs:

• Retirement Annuity: Ideal for self-employed individuals or those without an employer-sponsored fund
• Pension Fund: Typically provided by employers with contribution matching

Can I Use My Retirement Annuity as Collateral for a Loan?

No, Retirement Annuities cannot be used as collateral, as they are strictly for retirement savings.

Does a Retirement Annuity Offer Protection From Creditors?

Yes, Retirement Annuities are protected from creditors, meaning they cannot be seized in the event of bankruptcy.

Can I Transfer My Retirement Annuity to a Living Annuity?

Yes, when you retire, you can convert your RA into a Living Annuity, allowing flexible income withdrawals while keeping your money invested.

Can I Invest Offshore in My Retirement Annuity?

Yes, many Retirement Annuities allow for offshore investments, providing access to global markets and currency diversification.

What Happens If I Stop Paying into My Retirement Annuity?

Your Retirement Annuity remains invested and continues to grow, but no new contributions will be made. Some providers may have minimum contribution requirements.

Can I Increase or Decrease My Retirement Annuity Contributions?

Yes, most providers allow flexible contributions, meaning you can increase, decrease, or pause payments depending on your financial situation.

What Are the Advantages of a Retirement Annuity?

• Tax-deductible contributions (up to 27.5% of taxable income)
• Tax-free growth while invested
• Disciplined savings until age 55
• Flexible investment options including offshore exposure

How Much Tax Do I Pay When Withdrawing from a Retirement Annuity?

• No tax on investment growth
• Lump sum withdrawals are taxed according to the SARS retirement tax tables
• Monthly annuity income is taxed at your marginal tax rate

Can I Have More Than One Retirement Annuity?

Yes, you can have multiple Retirement Annuities (RAs) with different providers or investment strategies to diversify your savings.

Can I stop paying into my Retirement Annuity?

Yes, most providers allow you to pause or stop contributions without penalties, but your money remains invested until retirement.

How do I choose the best Retirement Annuity?

Consider these factors:

• Fees and charges – Look for low-cost options to maximize investment growth.
• Investment performance – Choose a fund with a strong track record.
• Flexibility – Ensure the Retirement Annuity allows adjustable contributions and fund choices.
• Provider reputation – Work with a trusted financial institution or advisor.

What types of investments can I have in a Retirement Annuity?

A Retirement Annuity typically invests in:

• Stocks (equities)
• Bonds
• Property funds
• Money market instruments
• Balanced portfolios following Regulation 28 (ensuring diversification and risk control)

What happens when I retire with a Retirement Annuity?

• You can take up to one-third of your savings as a lump sum, subject to tax.
• The remaining two-thirds must be used to buy an annuity, which provides a monthly retirement income.

How much is a Retirement Annuity per month?

The cost varies based on:

• The provider – Different financial institutions have different minimum contributions.
• Your contribution level – Some providers allow contributions from as little as R500 per month, while others require higher amounts.
• Fees and charges – Some Retirement Annuities have administration and investment fees that may impact your monthly costs.

Can I cancel my Retirement Annuity and get my money back?

No, you cannot cancel a Retirement Annuity and withdraw the funds unless you qualify under the early withdrawal conditions. If you stop contributing, your funds will remain invested until you reach retirement age (55 or older).

Can I transfer my Retirement Annuity to another provider?

Yes, you can transfer your Retirement Annuity to another provider, but it must be a like-for-like transfer to another Retirement Annuity fund. This ensures your savings remain tax-protected and compliant with retirement regulations.

Can I withdraw my Retirement Annuity early in South Africa?

Withdrawals before age 55 are generally not allowed, except in the following cases:

• If the fund value is less than R15,000
• If you become permanently disabled
• If you emigrate and your emigration is recognised by the South African Reserve Bank