What is a retirement annuity (RA)?
It is a retirement fund that everybody can contribute to. Many taxpayers, especially businessowners make ad-hoc payments to RAs before the end of February to reduce their tax liability.
What are the benefits of an RA?
- You are investing for retirement.
- Your contributions to it are tax-deductible within certain limits, and the first R550 000 can be withdrawn tax-free at retirement, subject to the Income tax Act.;
- Investment growth is tax-free on the underlying funds;
- The investment value is not part of your estate and is exempt from estate duty (savings of 20% or 25%) and executor’s fees (3.5% plus Vat).
- RAs are protected from creditors.
Herewith an illustration of your guaranteed returns before any investment returns because of the tax savings.
