Now is the time for your annuity contributions!
Contributions to a retirement annuity, to qualify for the 2020/2021 fiscal year, must be made before or on 28 February 2021. Our advice to you is to preferably make your contribution before 25 February 2021 to avoid any administrative deadlines.
A maximum of 27,5% of your gross taxable income (before deductions for donations and excluding severance package) or remuneration (excluding severance package) is deductible from your taxable income for retirement annuity contributions. Deductible contributions are limited to the smallest of 27,5% or R350,000-00 of the afore mentioned income. Any contributions above the 27,5% or R350 000-00 can be deducted in future years.
The case for retirement annuities:
Retirement annuities caused negative reaction in the past for high costs in the products. The last couple of years the cost structure has changed and this is one of the best ways to save for your retirement.
Just a few factors:
- Assets traded within a retirement fund are not subject to capital gains tax. If profits are taken in a retirement annuity it will be free from capital gains tax.
- At the moment dividend tax is 20%. If a dividend of R1,000-00 is paid to an individual only R800,00 (R1,000-00 – 20%) will land in the pocket of that individual. All Retirement funds are free from dividend tax. Therefore, investments within a retirement annuity are not subject to dividend tax. The total R1,000-00 dividend and not merely R800-00 within the retirement annuity will accrue to you.
- Assets within a retirement annuity are not part of your estate and therefore free from probate duties. If the worth of your retirement annuity is R10 million, it will be exempt from any probate duties, because it is not deemed an asset in an estate.
- Income from interest as well as rent income which accrue to a retirement fund is exempt from income tax.
- Creditors cannot seize funds invested in a retirement annuity. If you are declared insolvent during your lifetime the assets within your retirement annuity will be protected.
- In the past costs were not transparent. In present day products costs are transparent. There is no reason for an investor to have more costs in a retirement annuity than in a regular unit trust or equity investment.
- As investor you have access to almost all unit trust funds within a retirement annuity.
Please contact us if you have any questions or want to make a contribution.
Author: Guillaume Oberholzer
