Tax Thursday beats Black Friday
22 Jan, 2024

Pieter Albertyn, Head of Product Solutions at Momentum Investo



What does Black Friday have to do with a retirement annuity?



Pieter Albertyn, Head of Product Solutions at Momentum Investo, explains you can’t beat the real value that tax rebates offer.



We’re all looking for a great deal and value for money. But not a lot of people know where they can find even bigger discounts than on Black Friday or Cyber Monday. The answer is with the great tax rebates they get when they invest in a retirement product. That’s why we are naming 29 February 2024 “Tax Thursday”.



We do it a bit tongue in cheek because people can put extra money into their retirement annuity throughout the year. “Tax Thursday” is just the final cut-off date to make sure they can get as much money back from the tax man as they can before the current tax year ends. The real value they will earn for themselves in this way is incomparable.



Best is, in practice, it means government is giving you back something in your pocket. In fact, the rebate gets bigger the higher your tax bracket is.



For instance, if you earn R30 000 a month, it means you usually pay tax of 31% of your income. For your retirement investment, this means that you will get back 31% or R310 of every R1 000 you invest. This implies that your investment of R1 000 is costing you only R690 – you’re getting more than a third “for free”. You get your tax rebate when you submit your tax return.



If you reinvest this tax rebate into your retirement product the next year, you can get an even bigger tax rebate during the next 12 months. There is a limit to how big your tax rebate can get, but this only kicks in for people at a very high income level.



All of this means the value and “discount” you get on your retirement product is far more profitable than the 5% or 10% discount you’ll get on a washing machine or computer. And it’s much more real than any marketing gimmick.



The growth on a retirement investment is also tax-free, which means you’ll only start paying tax on your income from your investment when you retire. Chances are that you may also be in a lower tax bracket by then.



Up to now a retirement annuity has often been called an inflexible investment. This is because you can’t access any money until you turn 55. Some people like this kind of “forced discipline” of not being able to access their investment. For others, the new two-pot retirement system will offer some relief in emergencies.



Government is yet to announce the final implementation date, but sooner rather than later people will be able to access some retirement money when they are in a tight spot.



No other product can give you the tax benefits of a retirement annuity – it is the most tax-efficient investment you can get.







@Pieter Albertyn
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