Take a tax break

February is retirement annuity and tax-free savings top-up season

 

Topping up your Retirement Annuity (“RA”) or Tax-Free Savings Account (“TFSA”) before the new tax season has some major financial benefits. Here are 5:

  1. Your RA is protected from insolvency.
  2. Upon death, an RA is not subject to estate duty, provided no lump sum is taken.
  3. Individuals can include RA contributions to their tax return and receive a rebate from SARS.
  4. You can top-up your RA and/or TFSA to the limits before the end of the tax year.
  5. Your tax-free savings account allows you to save up to R36 000 per year, tax-free.

Let us look at the differences between these two tax-efficient options:

What is it?

Retirement Annuity

A vehicle designed specifically to save for retirement where access to savings is only allowed from age 55.

Tax-Free Savings Account

A tax efficient savings vehicle introduced by government to encourage people to save.

Are there any specific tax benefits?

Retirement Annuity

Contributions are tax deductible and protected from creditors.

Tax-Free Savings Account

Yes. No tax on interest or other income, no dividends tax and no capital gains tax.

Are there any contribution limits?

Retirement Annuity

Yes. You can contribute up to 27.5% of taxable income capped at R350 000 per financial year.

Tax-Free Savings Account

Yes. R36 000 per financial year or R500 000 over lifetime.

Can I withdraw my money?

Retirement Annuity

Only 1/3 at retirement. At least 2/3 must go towards an annuity. If full cash value at retirement is below R247 500, you are allowed a full withdrawal.

Tax-Free Savings Account

Yes.

What are the estate planning benefits?

Retirement Annuity

You may nominate beneficiaries so it does not form part of your estate.

Tax-Free Savings Account

Forms part of your estate.

Chat to us online for assistance with opening a new account or to top-up your existing investment account. Alternatively, fill in the form below for our client services team to call you back: