Wealth management and investment advisory

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+27 11 268 1282

Bayswater Capital Head Office
Unit 4, Ground Floor,
Commerce Square
Rivonia Road
Sandhurst, 2194

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How does a Retirement Annuity (RA) work?

27 Jun 2022

An RA is a retirement fund in terms of the Pensions Fund Act. In the interest of limiting investment risk and preserving wealth for your retirement, RAs are subject to limits on the percentage of the portfolio that can be invested in higher risk asset classes. The limits are provided by Regulation 28.

RAs allow your money to grow tax-free and provide contributions up to 27.5% or R350 000 of your annual taxable income. Any contributions above the annual deduction limit can be rolled over to the following year.

Your Retirement Annuity can be accessed from age 55 onwards unless you retire early due to ill-health or emigrate to another country. At retirement, one third of your investment can be withdrawn as a lump sum (subject to lump sum tax) and the remainder of the investment must go towards a compulsory annuity. If your balance is less than R247,500 you can withdraw 100% of your RA in cash.

There are extensive benefits associated with an investment in an RA which include:
• No tax on interest, dividends, or capital gains while you remain invested
• Income Tax relief
• You can customise your RA to suit your needs
• RA’s are exempt from estate duty which makes them effective estate planning vehicles.