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The FUNDamentals of Tax Efficiency

Interesting Facts and Figures

Of the 4.5 million South Africans that submitted a tax return in 2012, only 1.9 million claimed deductions for pension fund contributions and 1.2 million claimed deductions for retirement annuity contributions.


Truth be told, if you think you are saving enough for retirement, you probably aren’t. As part of the financial planning process, individuals should aim to retire with a monthly income equal to 75% of their salary.

Tax Benefits

Did you know that there is no tax on the interest income or dividends earned by your retirement annuity and there is no capital gains tax on capital gains in the portfolio?

What does this mean?

You can benefit from years of “tax free” investment growth within a retirement annuity, which will help towards increasing your investment returns. Any money saved on either paying tax or fees from your investment, is money that can be re-invested to create more growth in your portfolio.


On retirement, you can as a once-off draw up to R315 000 from your retirement annuity tax free subject to certain limits.

The tax scale for a retirement annuity, which is according to the current tax tables for retirement, is as follows:

R0 to R315 000 - tax free

R315 001 to R630 000 - taxed at 18%

R630 001 to R945 000 - taxed at 27%

R945 001 and above - taxed at 36%

Estate Planning

A retirement annuity is beneficial as an option when structuring your assets to pass to your beneficiaries.

Upon your passing, the funds will be immediately available for your dependants.

Executor’s Fees

The value of your retirement annuity will not be subject to executor’s fees (which is usually charged at a rate of 3.99% of the gross value of your estate) and your beneficiaries will also not be required to pay capital gains tax that typically applies to specific assets on your death.

Estate Duty

A retirement annuity is also not subject to estate duty, which is a tax payable to SARS if the value of your estate (total net value of your assets) is more than R3.5 million.


• tax deductible contributions

• tax free investment growth

• tax free at retirement if below tax free amounts as per retirement fund tax tables

• favourable tax rates based on a sliding scale at retirement

• no executor’s fees, estate duty or capital gains tax to be paid by your beneficiaries

Sources: and

The contents of this article are sourced from third parties.There is no warranty of any kind, expressed or implied, regarding the information or any aspect of this article. We shall not be responsible for and disclaim liability for any loss, damage (whether direct or consequential) or expense of any nature whatsoever, which may be suffered as a result of, or attributable to, the use or reliance upon the information provided in this newsletter

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