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Retirement Planning
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24 June 2011
The best savings vehicle is a Unit Trust Based Education Fund (UTBEF), says Hubert Feris, a Financia...
19 June 2011
A proposed system of tax credits for medical scheme contributions could make scheme membership more ...
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 Home  Retirement Save tax with a Retirement Annuity
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 11 Ways to save tax with a Retirement Annuity
[1]
Your contributions are tax-deductible up to a certain maximum.
[2]
Disallowed contributions (over the maximum) can be carried over to the next year of assessment and, if unused during the contribution period, can be offset at retirement to increase the tax-free portion of your lump sum. Any balance can be offset against your income after retirement!
[3]
If you have an all-equity Retirement Annuity invested in SA-listed shares, no tax will be paid on the build-up. (Because local dividends and capital appreciation are free). This is like having a tax-deductible share portfolio!
[4]
Your lump sum at death or retirement is tax free up to a certain amount. (The greater of R120 000 or R4 500 x years of fund membership on retirement.) By starting RA contributions early and being a member for more than 26 years, you will benefit from the R4 500-portion of the formula.
[5]
The balance of the lump sum is taxed at the more beneficial average rate of tax.
[6]
You can deduct a further R1 800 per year in respect of reinstatement contributions under certain conditions.
[7]
On death, any benefits paid out by way of an annuity are free of estate duty.
[8]
If you leave your employer and receive a withdrawal benefit from your pension or provident fund, you can transfer it into a RA fund tax-free.
[9]
On retirement, you have a choice between a conventional annuity and an equity-linked living annuity. By choosing the latter, you can manage the income you receive and so also manage your income tax position.
[10]
Once you reach age 65, your medical expenses become fully tax-deductible. On retirement, although your annuity is fully taxable, if it is used to cover medical expenses, it is deductible again.
[11]
Retirement Annuities are not subject to Capital Gains Tax.
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