At CS Wealth, we often say that retirement planning is not about predicting the future – it’s about giving yourself options. One of the most effective tools available to South Africans for long-term retirement planning is the Retirement Annuity (RA).
Despite how widely RAs are used, they are often misunderstood. Where should your RA be held? How flexible is it really? And what happens to your RA when you pass away?
This newsletter unpacks the essentials.
What Is a Retirement Annuity (RA)?
A Retirement Annuity is a tax-efficient investment designed specifically to help you save for retirement. Unlike an employer pension or provident fund, an RA is taken out in your personal capacity. This makes it particularly valuable for self-employed individuals, business owners, contractors, or anyone wanting to supplement workplace retirement savings.
Contributions are deductible from taxable income within legislated limits, and the investment grows free of tax on interest, dividends, and capital gains.
An RA on an Investment Platform vs an RA at an Insurance House
At CS Wealth, we generally prefer RAs held on investment platforms rather than traditional insurance-based RA policies.
Investment platform RA’s offer greater flexibility, transparency, and control. They provide access to unit trusts, ETFs, and professionally managed portfolios, with clear fee disclosure and the ability to adjust strategies over time.
Insurance-based RAs are typically structured as policies with more rigid rules, limited investment choice, complex fee structures, and potential penalties for changes.
Existing insurance-based RA’s can be transferred to an investment platform via a Section 14 transfer, without triggering tax.
How Does RA Contributions Work in South Africa?
Contributions are tax-deductible up to 27.5% of the greater of taxable income or remuneration, capped at R350,000 per tax year. Excess contributions roll forward for future tax benefits.
What Happens to Your RA When You Pass Away?
An RA does not form part of your estate and is governed by Section 37C of the Pension Funds Act. Trustees distribute benefits fairly to dependents and nominated beneficiaries.
A key advantage is that RA proceeds are not subject to executor’s fees.
Accessing Your RA at Retirement
Benefits are generally accessible from age 55. Up to one-third may be taken as a lump sum, with the balance used to purchase an annuity.
RAs are subject to Regulation 28 investment limits.
Our View at CS Wealth
We see RAs as a cornerstone of long-term planning when structured correctly. Our advisors ensure each RA fits into your broader financial and estate strategy.
