With only a few days left in the tax year, you have just enough time to make a prudent financial decision that may save you a few thousand rand on your next tax return, and earn you considerably more than that at retirement!  It’s common practice amongst those astute in minimising their tax deficits and maximising their long-term gain: top up your Retirement Annuity contributions to equal 15% of your annual income for the current tax year.

In South Africa, the prediction is that almost 9 out of every 10 people will have insufficient retirement savings when they enter their golden years.  The current average for RA contributions is 3,6% per annum, way below the recommended 15%.  In an attempt to encourage us to invest an adequate ‘basic minimum’, SARS has made 15% of your income, if invested in a Retirement Annuity, tax deductible!


One of the biggest stumbling blocks to RA’s is that it’s money saved for a future need that many people feel is so far off, that they don’t need to prioritise it just yet.  It’s an immediate ‘cost’ with a long wait until we reap any of the rewards.  But, here’s the point of this entire blog:

Contributing to your RA today, can have an immediate benefit to you, today!

As I’ve already mentioned, SARS will allow you a 15% tax deduction and stats show us that most people are contributing way below this.  This means, that in your tax return, there is an extremely high possibility that you can top up your RA and potentially save a significant amount of money.


Let’s say that you earn R12 500 a month, that’s R 150 000 per annum.  Without any RA contributions, or any other deductions, you would pay around R14 900 in tax (for the whole year or around R1 200 every month).

SARS allows you to deduct up to 15% for Retirement Annuity contributions.  From my example this would be R22 500, or R1 875 per month.  If you have been paying 15% every month, or choose to top up your RA to meet this cap (ie. your monthly contributions are less than 15% of your gross income), you would only pay around R 10 900 in tax for the whole year – that’s a saving of R 4000.  Double the income figures, and you can double your savings calculations.

What’s more, you’re investing this money, and the interest that it will earn, in your future.

If you’d like to take advantage of this now, don’t waste any more time and let’s hook up!
Posted in financial planning, savings tips.