A take a look at some great benefits of unit belief RAs.

If used optimally, a retirement annuity (RA) could be a highly effective automobile for constructing long-term wealth and securing a cushty retirement. Having the ability to make investments as much as 27.5% of your taxable earnings on a tax-deductible foundation (topic to sure most limits) is an apparent advantage of such a funding automobile.

Nevertheless, tax advantages apart, there are quite a few different benefits afforded by unit belief RAs which shouldn’t be missed.

  • Funding flexibility: When investing in an RA on a LISP platform, buyers have a variety of unit trusts to select from permitting each native and worldwide publicity, topic to the restrictions set out in Regulation 28 (mentioned beneath). With many RAs, buyers can select their underlying investments and have some flexibility in how their contributions are invested.
  • Premium flexibility: RA buyers have full flexibility in the case of funding premiums. Buyers are in a position to cease and begin premiums as they select with none penalties or charges being charged. Premiums will be arrange by way of month-to-month, quarterly or annual debit order, or will be paid over manually on an advert hoc foundation, making it a super funding automobile for fee earners, enterprise homeowners or those that earn an irregular earnings.
  • Retirement financial savings top-up: In case you are presently contributing to your employer’s pension or provident fund however not making use of the total 27.5% allowance, you may successfully use an RA to prime up your financial savings. As an illustration, if you’re contributing 15% of your earnings in direction of your organization’s pension fund, you should utilize a RA to take a position an additional 12.5% of earnings on a tax-free foundation.
  • No penalties: The payment construction of an RA on a LISP platform is way the identical as that of a unit belief funding. All funding, platform and adviser charges are disclosed upfront and, with full premium flexibility, no cancelation or termination charges or penalties of any kind are payable.
  • Transparency: Unit belief RAs provide refreshing transparency in respect of portfolio development, funding returns, charges and reporting.
  • Accessibility: Whereas not having the ability to entry the funds in your RA till age 55 could also be thought of a drawback, this mechanism is the truth is designed to guard your retirement egg. Understanding that your funds can’t be accessed prematurely, besides within the case of ill-health or emigration, offers peace of thoughts and removes the temptation to borrow towards your future.
  • Lengthy-term progress: With only a few obstacles to entry, RAs make glorious long-term funding autos. Should you start investing in an RA early in your profession, the long-term time horizon will mean you can choose extra aggressive funding methods which ought to offer you beneficial market returns over time.
  • Tax exempt: Moreover for the tax-deductible premiums, RAs are exempt from tax on dividends and curiosity, and no Capital Features Tax is payable on progress earned within the funding. At retirement, buyers are additionally in a position to withdraw as much as one-third of their funding as a lump sum of which the primary R500 000 is tax-free. Something drawn as a lump sum over the R500 000 tax-free portion will likely be taxed in keeping with the retirement tax tables
  • Your property: A major advantage of an RA is that it doesn’t kind a part of your property. Within the occasion of your passing, the funds in your RA will be paid on to your nominated beneficiaries to help them financially after your demise.
  • No property obligation: As the cash in your RA doesn’t kind a part of your property, these funds aren’t topic to property obligation.
  • Collectors: Laws goals to make sure that the cash in your RA is earmarked for retirement and is protected against collectors. Nevertheless, keep in mind that this doesn’t apply to tax owed to SARS and upkeep claims.
  • Emigration: Should you determine to to migrate from South Africa, laws allows you to entry the total quantity invested in your RA, allowing for that the withdrawal will likely be taxed.
  • Sick-health: In case you are sick and unable to proceed working, you might qualify for early retirement out of your retirement you probably have not but reached age 55. Nevertheless, you’ll need to fulfill stringent necessities in respect of everlasting incapacity to be able to be permitted to retire out of your RA.
  • Reinvest tax returns: In case you are presently contributing in direction of a retirement, you’re more likely to obtain a tax refund from SARS on the finish of this tax 12 months. An effective way of re-employing your cash and additional boosting your retirement financial savings is to re-invest your tax refund into your RA.
  • Advert hoc: Any bonus, inheritance or monetary windfall will be injected into your RA on an advert hoc foundation, though you will need to calculate essentially the most tax-efficient stage of doing this.


Though Regulation 28 of the Pension Funds Act is commonly thought of disadvantageous to investing in an RA, it’s price contemplating that this laws is the truth is designed to guard buyers towards poorly diversified portfolios. By way of Regulation 28, buyers in retirement funds are required to restrict their fairness publicity, whether or not in South Africa or overseas, to 75%. Buyers are additionally restricted to 25% in native or worldwide property, and 30% in overseas investments.

As buyers are required to buy a life or dwelling annuity with a minimum of two-thirds of their RA at retirement, one other necessary issue to keep in mind is cashflow planning throughout your retirement years. Having an excessive amount of of 1’s retirement capital tied up in a obligatory funding could trigger cashflow issues and you will need to discover the optimum stability between one’s retirement and discretionary investments.

For many who haven’t but began saving for retirement, the start of the brand new tax 12 months in February 2020 is the proper time to start. Should you haven’t maximised your 2019/2020 contributions, you will have 6 weeks left to do it.

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