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WHY INVEST IN A RETIREMENT ANNUITY

START YOUR JOURNEY AND STAY ON TRACK

No matter what life stage you are in right now, being able to retire with an income that will sustain your lifestyle is a dream that all of us wish for. The journey from savings to retirement starts with a simple step. Put together a financial plan, set savings goals and objectives and constantly review your plan and progress. Start today and ensure that you take the first step toward the retirement you deserve.


THE JOURNEY FROM SAVING TO RETIREMENT

Once you’ve established how much you need to save, work toward your retirement with three simple steps:

STEP 1: START SAVING

Start by putting away as much as you can, as early as possible. It’s best to start earlier so you can increase your premiums gradually

STEP 2: MAINTAIN YOUR SAVINGS

  • Make sure you know where you are on your savings journey and whether you are on track to meet your goal.

  • Keep up with inflation by setting up annual premium increases.

  • Make voluntary premium increases whenever you get a promotion or salary increase.

  • Make lump sum injections into your savings when you can.

Remember, your contributions are tax deductible – so as you contribute more, your tax refund increases.

STEP 3: EARN AN INCOME IN YOUR GOLDEN YEARS

At retirement, you have to invest at least two thirds of your retirement annuity in an

income solution to earn an income. There are various types of income solutions to meet your specific needs at retirement. These range from guaranteed annuities to living annuities and even a combination of both.


A RETIREMENT ANNUITY – THE IDEAL WAY TO SAVE FOR RETIREMENT

A retirement annuity (RA) is the perfect retirement savings vehicle for the self-employed or as a top-up to a pension or provident fund.

Changes to the Income Tax Act (effective 1 March 2016), allows potentially more generous tax deductions – encouraging you to save for your retirement.

Along with tax deductions, a retirement annuity has many other benefits.


HERE ARE A FEW REASONS TO SAVE IN A RETIREMENT ANNUITY:

Contributions are tax deductible – up to a maximum of R350 000 per year.

There is no capital gains tax on retirement annuities.

On death, any benefits paid either as an income or a lump sum is free of estate duty. Only contributions (made after 1 March 2015) which exceeded the tax deductible limits need to be included for estate duty purposes.

The investment growth within the fund is not taxed.

Your investment in a retirement annuity is protected against claims from creditors.

You have a wide range of underlying investment funds to choose from.

If you change jobs and get a withdrawal benefit from your pension or provident fund, you can transfer it into a retirement annuity fund, tax free.

RETIREMENT ANNUITY: THE EFFECT OF TAX-FREE GROWTH AND REINVESTING THE SAVING FROM TAX-DEDUCTIBLE CONTRIBUTIONS


The graph above illustrates R1000 per month invested in a retirement annuity and a taxed investment for 15 years. When investing in a retirement annuity, your contributions are tax deductible which means you will receive a refund from SARS every tax year. By reinvesting this refund into your retirement annuity, you receive tax-free growth on your initial contribution and on the reinvested refund. 

In the above example, investing in a retirement annuity resulted in an investment value of R644 614 compared to the taxed investment which had an investment value of R407 116. That’s R237 498 more!

The graph is for illustration purposes only. It includes fees and charges and assumes that the contributions are invested in a Balanced Fund. The returns are based on historical Balanced Fund returns from January 2000 to December 2015. Past performance is not a prediction of future returns.



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