The tax year end is approaching, and you don’t have much time left to top-up your retirement fund and tax-free savings accounts.
This serves as a reminder to top-up before 29 February 2024 to take full advantage of the tax incentives provided by the government.
So why should you be topping up these investment products? What do we mean by “topping up”? Let us unpack the product characteristics and benefits, so you have a clear understanding on how these products contribute to your long-term savings objectives.
Retirement Annuities
A Retirement Annuity is a tax-efficient investment savings vehicle designed specifically to save for retirement, where access to savings is only allowed from the age of 55. Benefits may be accessed before 55 under certain circumstances (medically disabled, cessation of tax residency or if the amount is less than the prescribed minimum of R15 000).
Contributions during the year of assessment are tax-deductible up to a specified limit. The annual limit is 27.5% of the greater of taxable income or remuneration, limited to a maximum of R350 000 per tax year. Any excess contributions (above R350 000) in one tax year may be carried over and used as a deduction in the following years of assessment. Importantly, no tax is payable on the growth of your capital (interest, dividends, or capital gains) while invested in the Retirement Annuity.
There are also clear estate planning benefits as the proceeds do not form part of your estate and are paid directly to dependents/ nominated beneficiaries on death.
Tax-Free Savings Accounts:
The Tax-Free Savings Account is a tax-efficient investment savings vehicle introduced by the government in 2015 to encourage people to save.
You will enjoy investment growth free of any income tax on interest earned, dividends tax on dividends or capital gains tax on capital gains made. This means that your investment growth is untaxed, allowing for even greater compounding.
The current contribution limits to this investment type are R36 000 per tax year and R500 000 over your lifetime. Any excess contributions above these limits are subject to a penalty of 40% of the amount exceeding these thresholds, payable to SARS.
Withdrawals are allowed at any time, however, withdrawing money will use part of your lifetime limit for tax-free savings and cannot be replaced.
For investors looking to invest in a retirement annuity or tax-free savings account, we have a comprehensive fund offering that caters to every investment objective and risk profile. Our range of diversified, Regulation 28 conventional and Shari’ah compliant funds are ideal for long-term wealth creation.
The consistent application of our investment approach is designed to deliver superior risk-adjusted performance over the long term.
The below table indicates the fund suitability for each of these product types:
