Retirement Annuity Investment
We believe that the easiest and most effective tax saving measure is through Retirement Annuity investment. It is important to check the level of your contributions as the allowable deductions from taxable income are significant. Points to consider are:
27.5% of remuneration or taxable income may be deducted by way of contributions to an approved pension, provident and retirement annuity. Invariably, if you are a member of an employer fund, there is a short- fall between what you and your employer contribute and the 27.5% cap. This can be made up via personal retirement annuity contributions.
If you are not a member of an employer fund then the whole 27.5% can be invested in a retirement annuity.
There is an overall cap of R350 000 per tax year although excess contributions may be carried over, used to enhance the tax free lump sum of R500 000 at retirement or to reduce the taxable element of a living annuity.
Maximum tax relief is 45% of contributions – depending on your tax bracket. Contributions can be regular payments or once off, adhoc, payments, particularly where you are already making regular contributions but need to top up to obtain maximum tax relief.
Further tax relief is achieved through these retirement funds. There is no income tax, dividends tax or capital gains tax on retirement funds themselves.
Retirement fund benefits do not form part of a deceased estate. On the death of a member benefits may be paid direct to a nominated beneficiary and are not subject to delays in an estate process.
Executors’ fees which can amount to 4% (including VAT) on assets in a deceased estate do not apply and neither does Estate Duty.
Fiinally, Retirement fund benefits are protected from creditors!
Don’t forget to check your spouse or partners situation as all these advantages apply separately to all taxpayers.
Tax Free Investments
Besides the tax exemptions on interest earned (R23 800 for under 65 and R34,500 for over 65) there are also Tax Free Savings Accounts and Investments. The latter range from specifically designated tax free savings accounts at banks to tax free unit trust investments available through various asset managers.
South Africans with an identity number can currently invest up to R36 000 per annum (ie during any tax year) into the afore mentioned accounts. There is however an overall limit of R500 000 in these tax free investments. This means that by using the annual allowance the limit will be reached in 14 years.
Whilst an investor may withdraw from a tax free investment at any time such withdrawn amount may not be then reinvested at a later stage.
We do not believe that these tax free investments take the place of retirement annuities, as they don’t offer the same benefits. Instead they should be seen in isolation and perhaps the solutions to other needs such as children’s education.
Maximus Tax Free Savings Investment
This is a portfolio of a broad spread of investment funds comprising approximately 50% local assets and 50% offshore. It is managed by our partners Morningstar in conjunction with ourselves and is considered to be a longer term investment.
Contact Us
If you want to know more about how to maximise your retirement annuity investments and tax free savings, please contact your Maximus Adviser – or alternatively Ansie, Kamiela or Susan at our office tel: 011 656 2910
Please note: Cut off times for tax relief – February 2021
Our cut- off date to ensure timeous processing of new and additional investments is Monday 22 February at 13.00 hrs.
If you would prefer a direct debit from you bank account for any lump sum investments then the cut off date is earlier – Friday 19th February at 12.00 hrs.
