• Shreekanth Sing, Technical Legal Adviser, PSG

Save tax-efficiently for retirement

With tax year-end rapidly approaching, we are hearing a lot about the importance of maximising tax deductions. While tax savings are a great motivator not to delay your planning, retirement funds offer a number of benefits that make them attractive savings vehicles.

Tax deductions on contributions, of course

Contributions to a retirement fund are tax deductible up to 27.5% of the higher of taxable income or remuneration, capped at R350 000. A retirement fund is a pension, provident or retirement annuity fund that is used to house and grow your pre-retirement savings, so that you are able to generate an income from your investments once you retire.

However, many people are not aware that retirement funds also allow you to offset contributions that were not previously deducted. They can be used to lower the tax payable on the lump sum cash portion taken at retirement, and even the tax payable on the income from your annuity.

Where does a retirement annuity fit in?

A retirement annuity is an easy and convenient way for investors to supplement their retirement fund savings and allows them to structure their investment according to their preferences. It is also a good option for those who do not belong to their company pension fund and need to save independently for retirement.

There’s more to saving for retirement than just saving on tax

In addition to the tax advantages, retirement savings offer a number of distinct benefits that is worth reiterating. There is a lot more that makes saving in a retirement vehicle like a retirement annuity attractive than just the tax deduction you may qualify for!

Tax-free growth

A tax-efficient investment vehicle enhances the returns achieved by investors over the long term. Within a retirement fund, no taxes are paid on interest, capitals gains or dividends. This means your money effectively grows faster than it would in a taxed product.

Free from estate duty

Retirement funds are free from estate duty, which is typically levied at 20%. At death, retirement fund benefits are paid to your dependants, ensuring that your family is able to use the funds when you are no longer around. Your retirement benefit can help maintain your family’s standard of living after your death.


Retirement funds provide protection should investors experience tough times. Funds within a retirement fund cannot be attached by creditors. This means that if you are not able to repay your debts or are declared insolvent, your retirement funds are protected from creditors. This can allow for time to get back on your feet while ensuring that long-term retirement savings are protected.

Sound investment principles

Retirement funds are regulated by the Registrar of Pension Funds, governed by Boards of Trustees, and must adhere to the asset allocation limits as set out in Regulation 28 of the Pension Funds Act. Regulation 28 aims to protect the investor by encouraging sound asset allocation decisions. By limiting the exposure to certain types of assets, the regulator aims to ensure that investors don’t ‘bet’ all their money on a potentially volatile asset class, putting their ability to retire as planned at risk.

It is important to be aware of the benefits offered by retirement funds and to use them more effectively in saving for your retirement. At the same time, tax year-end makes a great incentive to stop delaying and to ensure you start today. Get ready for retirement while you can and make the most of the time you have to invest.


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