A Retirement Annuity Saves Income Tax!

If you are going to pay income tax, THEN READ ON!

Have you SAVED your full allowance for the year?

What are your expectations when you retire?

A comfortable retirement sadly eludes most South Africans. Statistics show that only nine out of every 100 South Africans retiring at age 65 have made adequate provision for their retirement.
Dreams are but one thing; reality is, all too often, something entirely different.

Factors that contribute to inadequate retirement benefits are:

  • Only beginning retirement planning at 50.
  • Relying entirely on your company pension fund to provide you with an income after retirement.
  • Changing jobs and spending your withdrawal benefit on a holiday or a new car. This is one of the most dangerous things you can do.
  • Paying large outstanding debts such as your housing bond after retirement.
  • Unexpected retrenchments.

You should start planning for your retirement when you receive your first pay cheque.
Planning for your retirement should be seen as an ongoing process, not a once-off event.

How do you plan for retirement?

  • Determine how much income you will require on retirement in real terms.
  • Request a financial needs analysis (FNA) to determine what lump sum is required at retirement to provide this income, and what monthly contribution is required to provide this lump sum.
  • Select the most appropriate vehicle(s) to achieve your retirement goals.
  • Continually monitor your investments to ensure that you will meet your retirement goals.

The graph below illustrates the effect of delaying investing for your retirement. It shows how much you need to save per month starting at different ages to achieve the same results as paying R100 per month from age 20.

retirement annuity

Putting away a little extra today, makes a BIG difference tomorrow.
When it comes to planning for your future, what you do today is what really counts.

Please call me NOW!!




How Retirement Annuities Work

Say your income is R300,000 per year.
You can contribute a maximum TAX-DEDUCTIBLE contribution of 15% of this income or R45,000 per year or R3,750 per month.

Your marginal tax rate on this contribution is 35%. That is R 1,313 per month.
This amount is that SARS is giving you back (by way of a tax-deduction) for saving into an RA!

Or looking at it another way, for every R1 you invest SARS is contributing 35 cents for you.
Therefore, you are actually contributing only R 2,437 from your pocket (R 3,750 less R 1,313).
The rest comes from SARS

So for just R 2,437 invested by you, YOU IMMEDIATELY GET R 3,750 invested into your RA.


That's a return you cannot beat!

But that's not all..

If your RA grows at say 10% per year, ANY OTHER INVESTMENT MUST GROW BY 69% to equal your RA. This is because your actual contribution is less, as a result of the exemption from SARS.

You don't get the exemption with any other investment!

R1,000 grows to R1,100 - or a 10% return.
You paid only R 650 to get the same growth of R1,100.
That is a return of 69%!

Assumes only R1,000 invested and the contribution qualifies for a tax deduction.
No guarantees implied.

You own your own business.
You don't depend on others to provide for your retirement.
Your future is in your hands.

BUT, if you do not plan for your future - WHO WILL?

You need a flexible retirement plan that offers the best tax benefit whilst allowing you to vary the contributions during the term.

A Retirement Annuity offers you all of this.

Reap the full benefits of a lifetime of working for yourself!


A RA is nothing more than a one-person pension plan.
You apply to become a member of an RA fund, which is approved as such by the Registrar of Pension Funds and the tax authorities.
No employer/employee relationship is required to qualify for membership.

RAs are the main savings vehicle for self-employed persons to accumulate funds for retirement in a tax-efficient way.
They are also popular as a top-up plan for salaried employees who belong to pension funds to close the income gap at retirement.

Smaller employers often choose RAs for their staff over traditional pension schemes, thereby avoiding the administration and responsibility involved in operating the latter schemes.


There are various investment vehicles for retirement provision.
The most ideal vehicle for this purpose is the retirement annuity with its tax advantages:

1. Retirement annuity contributions are tax deductible at your marginal tax rate.

The maximum allowable deduction from your taxable income is the greater of:

2. As your marginal tax rate increases, so does the tax saving.
This means that for each R1 contributed to a retirement annuity, the tax saving can be as much as 40c of each rand if you are in the top marginal tax bracket.

Apart from the obvious tax advantages, retirement annuities have certain other features which are not necessarily enjoyed by the other investment vehicles.

As long as the Receiver of Revenue continues to allow the deductibility of contributions, retirement annuities simply cannot be beaten on the strength of their favourable gearing.

However, for many people, the biggest advantage of an RA may not be tax-related at all!

An RA is a disciplined way of saving on a regular contractual basis that can also be made to give guaranteed results. The fact that by law, the capital cannot be accessed before at least age 55, is often a blessing in disguise.
This means that you are more likely to reach retirement with some capital to produce a retirement income if you follow the RA route, unlike many other types of liquid investments which, experience shows, are raided for other purposes long before retirement!

The tax savings, combined with flexibility as to retirement dates and contributions and the choice of investment and guaranteed options, make the RA an ideal investment for retirement planning.

... by employing your wife and paying her a salary, with which she takes out an RA.

Do you want to.

If you answered YES to any of the above questions then we have the solution for you.

Employ your wife and pay her a salary, which is tax deductible for your business.
Your wife then pays the maximum contribution to her RA. After this deduction, ensure that the balance of her salary is below the taxable threshold, thus no tax is paid on her income!

Income paid to your spouse must be reasonable in relation to services rendered.

NOW, That's something to seriously consider!!

What if you're forced to retire a few years earlier than you expected?
What if you find at age 60 that you haven't enough to retire on? It's then too late.
And what if you can't retire because you don't have enough?

Surely, it makes sense to do something NOW?
An additional investment today can buy you a whole lot of added peace of mind.

February is the end of your tax year.
Maybe you will have to pay in towards income tax?


You can invest some of that income tax for yourself, not SARS!
You can top up your RA within certain limits.

Why not pay yourself your hard earned money instead of paying the Receiver?

Talk to me NOW.

And if you do not have a RA, even more reason to call me!

As a certified financial planner, I would like to help you make sure that you will enjoy your retirement and make your life as comfortable and carefree as you dream it will be - no matter what the circumstances.

The sooner the better, because when it comes to financial planning only you can make the difference.

If you would like an indication of what you should be saving for retirement, please complete the RETIREMENT SAVINGS REQUEST FORM and mail it to me.

I will reply with some values for you.

Don't leave your concern here. Call me for advice - no obligation!

Especially if you are concerned about Your Retirement Annuity.

contact uspyburn@peterpyburn.co.za

peter pyburn broker

A Retirement Annuity Saves You Income Tax and boosts your pension savings.

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