10X Investments

Retirement Annuity FAQs

  1. What is a retirement annuity?

    A retirement annuity is a tax effective retirement investment vehicle for individuals. The primary target market is individuals who do not participate in an pension or provident fund.

  2. Who should consider using a retirement annuity?

    Retirement annuities are appropriate for:

    • Self-employed people
    • Employees in organisations that do not provide a pension or provident fund
    • Employees who earn a significant amount of non-pensionable income and wish to increase their savings towards retirement

    Retirement annuities can also be used to house the proceeds of your pension or provident fund when terminating your employment.

  3. What are the tax benefits of a retirement annuity?

    There are three tax benefits:

    1. Contributions are tax deductible – up to a maximum of 15% of non-pensionable taxable income. If you contribute more, you may claim excess amounts in future tax years. You may also add your excess contributions to the tax-free portion of any lump sum you receive.
      The concept of non-pensionable income falls away from 1 March 2015.  From 1 March 2015, you may deduct up to 27,5% of your gross remuneration or taxable income (whichever is the higher) in respect of your total contributions to a pension, provident or retirement annuity fund, subject to an annual limit of R350,000.
    2. Investment returns are tax free – there is no income tax or capital gains tax on the investment return earned in a RA.
    3. Benefits are taxed on a favourable basis – lump sum benefits are taxed on a sliding scale with a portion of the benefit tax free (see details under “What is the tax on your RA benefits?”).
  4. What is non-pensionable income?

    Individuals may deduct up to 15% of their non-pensionable income as tax free contributions to a RA. The distinction between pensionable and non-pensionable income can be confusing, but it is important you understand this. Taxable investment income is always non-pensionable. The confusing part relates to your remuneration from employment.

    Pensionable income is the income used by your employer to calculate your pension or provident fund contribution. This income will typically include any fixed remuneration (e.g. salary or wages) but may exclude variable amounts such as commissions, bonuses and overtime.

    If you are a member of a pension or provident fund and all your remuneration (i.e.. your salary, commission, bonus and overtime) is pensionable, then none of your remuneration is non-pensionable.

    If you are a member of a pension or provident fund and all your basic salary is pensionable but your commission and bonus is not pensionable, then you may claim 15% of your commission and bonus as a tax free deduction to a RA.

    Non-pensionable income is your taxable income excluding (if any) your pensionable income, retirement fund lump sum benefits, assessed losses and capital gains.

    If you are not a member of a pension or provident fund, all your remuneration is non-pensionable and you may claim 15% of your remuneration as a tax free deduction to a RA.

    The concept of non-pensionable income falls away from 1 March 2015.  From 1 March 2015, you may deduct up to 27,5% of your gross remuneration or taxable income (whichever is the higher) in respect of your total contributions to a pension, provident or retirement annuity fund, subject to an annual limit of R350,000.

  5. How many retirement annuities can you take out?

    You can invest in as many retirement annuities (RAs) as you wish, but the tax benefit is determined in aggregate, not in respect of each individual RA. In other words, the tax relief on contributions is limited to 15% of non-pensionable taxable income, irrespective of the number of RA memberships. And the tax-free lump sum portion may be claimed only once.

    *The concept of non-pensionable income falls away from 1 March 2015.  From 1 March 2015, you may deduct up to 27,5% of your gross remuneration or taxable income (whichever is the higher) in respect of your total contributions to a pension, provident or retirement annuity fund, subject to an annual limit of R350,000.

  6. When can you access your retirement annuity?

    In general you can only access your RA at retirement. However, you can withdraw your full RA investment in cash if you emigrate or if your RA investment is less than R7 000.

    You may retire and claim your benefit from the age of 55 onwards (unless you are in ill health, in which case you may claim earlier). You can take a maximum of 1/3rd of your investment as cash (plus any amounts invested not deducted for tax); with the balance you must purchase an approved compulsory annuity, which will pay you a pension for life.

    If your benefit is R75 000 or less at retirement (R150,000 or less from 1 March 2015) , you can elect to receive the full benefit as cash.

  7. How are your retirement annuity benefits taxed?

    Tax on lump sum benefits according to the following scale:

    Tax Rate Withdrawal Lump Sum Retirement Lump sum
    0% 0 – R25,000 0 – R500,000
    18% R25,001 – R660,000 R500,001 – R700,000
    27% R660,001 – R990,000 R700,000 – R1,050,000
    36% R990,001+ R1,050,001+

    Source: South African Revenue Service

    Annuity payments are taxed as income, according to the personal income tax tables.

  8. Can you stop contributing to your retirement annuity?

    Yes. You can make your RA “paid-up”. This means you no longer pay monthly contributions; however you will stay invested until you retire. You may retire from age 55 onwards.

    Be aware that if you make your current RA paid up, your service provider may claw back any unrecoverable broker commissions (plus accrued interest) from your investment balance. This should not, however, be a factor in your decision to make your current RA paid up or not, as your service provider will deduct the outstanding broker commissions anyway (either now or in the future).

    At 10X, we do not pay broker commissions as we do not use brokers. You therefore do not incur any “penalties” if you make your 10X RA paid-up.

  9. Can you transfer your retirement annuity?

    Yes, it is possible to transfer your retirement annuity from your present RA to the 10X RA, if the rules of your present fund permit you to do so.

    The rules of the 10X Retirement Annuity allow you to transfer your investment to another RA fund at any time.

  10. Won’t you pay penalties when transferring your retirement annuity?

    There may be a “penalty” if you transfer your retirement annuity (RA). These penalties represent a claw back of unrecovered broker commissions and costs. This should not, however, be a factor in your decision to transfer as your existing RA will deduct these unrecoverable commissions and costs anyway, either now when you transfer or in the future, over the remaining life of your RA.

    At 10X, we do not pay broker commissions as we do not use brokers. You therefore do not incur any “penalties” if you transfer your 10X Retirement Annuity.

  11. What happens in the event of a member’s death?

    In line with section 37 of the Pension Funds Act, the trustees of the retirement fund will distribute the proceeds, considering first the needs of your dependents and then the beneficiaries listed in your nomination form. It is thus important to fill in and update your nomination form annually. Your investment will be taxed on the same basis as on retirement.

  12. Can my employer contribute to a retirement annuity on my behalf?

    Yes. In the past, the main draw-back of a retirement annuity was that contributions made by an employer on behalf of employees were taxed in the employees’ hands. Such employees were thus prejudiced relative to members of pension and provident funds, as well as persons contributing directly to an RA. The employer can now deduct these contributions from employees’ pay. The deduction is (effectively) limited to 15% of the remuneration received during the year from non-pensionable remuneration.

    The concept of non-pensionable income falls away from 1 March 2015.  From 1 March 2015, you may deduct up to 27,5% of your gross remuneration or taxable income (whichever is the higher) in respect of your total contributions to a pension, provident or retirement annuity fund, subject to an annual limit of R350,000.

  13. Should you consider a retirement annuity ahead of a pension or provident fund?

    In general, pension or provident funds offer significant advantages over retirement annuities in terms of increased flexibility (investors can access their savings before retirement), lower costs, group life cover and no surrender penalties.

  14. Should you transfer the proceeds from your employer’s retirement fund to a retirement annuity or preservation fund?

    A preservation fund is a type of pension fund that enables investors to preserve their withdrawal benefits until retirement age. There are four differences between a retirement annuity (RA) and a preservation fund:

    1. Monthly ongoing contribution: with a RA you can contribute on a regular basis, but not with a preservation fund. Your preservation fund will only accept transfers from other funds.
    2. Withdrawal benefit before retirement: you cannot withdraw your benefits from an RA (unless you emigrate) before retirement (the minimum retirement age is 55). You can make one full or partial withdrawal from your preservation fund at any time before retirement.
    3. Retirement benefits: you can elect to receive your entire fund balance as cash if you are member of a provident preservation fund (or your vested right from 1 March 2015), but you can elect to receive only one-thirds as cash if you are a member of a RA or pension preservation fund (you must buy an annuity with the other two-thirds).
      Your ‘vested right’ is the balance on your provident or provident preservation fund at 1 March 2015, and the subsequent return thereon.
    4. Costs: the cost of investing with a preservation fund is generally lower than with a RA.

    Download RA application form

  15. How do you join the 10X Retirement Annuity fund?

    When you withdraw from your current retirement fund (either a company fund, retirement annuity or preservation fund), you must complete a withdrawal form, indicating that you wish to transfer your investment to the 10X Retirement Annuity Fund. This form must be signed and sent to HR (for a pension or provident fund) or to the fund administrator (for an RA or preservation fund). Thereafter, request a 10X RA Application Form, by e-mailing ra@10X.co.za or calling us at 0861 109 109.

    Complete and sign the form and fax (0865 201 934) or e-mail it back to us, together with a copy of the withdrawal form. Ensure that you have completed the “Transfer Fund Details” section on the application form. We will contact the existing fund, action the transfer and confirm when completed.

  16. What is the minimum 10X Retirement Annuity contribution and term?

    Your minimum monthly contribution to the 10X Retirement Annuity is R1 000. There is no minimum contribution term.

  17. What is the cost of a 10X Retirement Annuity?

  18. What reports can you expect from the 10X Retirement Annuity?

    10X issues regular performance updates:

    Benefit statements. These are published online monthly, and emailed to members quarterly. The information is presented in a clear and simple manner, to avoid confusion. Once a year, the Fund sends out a hard-copy benefit statement to every member.

    Investment report. This is published online every month and details the investment returns of all life stage portfolios and asset class benchmarks (equities, bonds, property and cash).

    Investor portal. This portal gives you access to all your plan details.


Your Questions

The information and answers supplied in this section do not constitute advice as defined by the Financial Advisory and Intermediary Services Act, 37 of 2002.

  1. August 04, 2013 at 1:44 pm, Alfred said:

    The early retirement penalty explained

    Next year July 28 I’ll turn 55 DV which affords me the option of early retirement from my Liberty RA policy with incurring early retirement penalties in which case it states that proceeds will be reduced by 1/3 for each month by which the retirement preceeds age 65. One third in cash is currently estimated at 542 928.02 rands. The current projected value at normal retirement is +/-1.5 million rand. However should I choose to transfer to the 10X RA Fund and still decide to opt for early retirement (let’s say next year) how will this be dealt with; esp in terms of early retirement penalties and the facts and figures financial repercussions.

    Reply
    • August 05, 2013 at 10:50 am, 10X Investments said:

      Alfred,

      Your numbers do not quite add up for us: if your proceeds were reduced by 1/3 for each month you retired before the age of 65, it would mean that you would lose your entire fund if you retired at any age before you turned 64 and 3/4. That is not likely nor is it permitted by our law. The one-third usually refers to the portion of your RA you are allowed to take out as a cash lump sum. With the other two-thirds you must buy a annuity.

      The way it usually works is that if you transfer or cash in your RA before maturity date, you are charged a surrender penalty, which is an accelerated recovery of upfront costs mainly broker commission) which are otherwise recovered over the full investment term. The maturity date is normally set at age 55, as this is the age you are legally allowed to claim your RA (although you can keep contributing to any age). The closer you are to the maturity date, the lower the penalty will be.

      Whatever “penalty” Liberty may charge you for cashing in your RA now, they will also charge you for transferring to 10X. 10X itself does not charge early retirement penalties as we do not charge any upfront costs against your RA.

      If you retire at age 55 instead of 65, it means that you will contribute for a shorter period, you will not earn an investment return thereon for those ten years and your RA savings have to last ten years longer. As you can tell, it is a bad recipe, and you will receive a far lower annuity income. If you cash in next year, and you convert your entire savings (presently 543k x 3) into an annuity, your monthly annuity income will be approximately R7 000 per month. If you waited until you turn 65, your annuity income could be much higher (R11 000 -14,000 per month) depending on your investment return and the level of fees you pay over the next ten years.

      Reply
  2. August 02, 2013 at 7:46 pm, Emmanuel said:

    How can I grow my retirement investment?

    Age: 51 years; male. Due to illness, I qualify for a retirement annuity pay-out. Which fund can I put this into for a high return? My other pensions will kick in at 55 and 60 years respectively and pay-out will be R1 020 000.00 after my 1/3. Thanking you dearly.

    Reply
    • August 05, 2013 at 10:20 am, 10X Investments said:

      Emmanuel,

      Unfortunately, we do not provide (specific) advice of this nature; we certainly cannot do so without doing an analysis of your financial needs. But be aware that to increase your return, you have to assume more risk, and assuming more risk means that you run the risk of losing some of your money.

      Assuming you have to make your current money last for the next four years (until your other pensions kick in, assuming those pensions will then cover adequately thereafter), you should probably invest quite conservatively (ie mainly in cash). You could also consider buying a fixed term annuity, that will pay you a guaranteed income for a fixed period (say four or five years). Shop around for the best price.

      To shop around for the best bank interest rates, you should visit the banks’ web sites. Again, be aware that higher rates normally have some conditions attached (eg you have to give notice within a certain time, or you may to lock up your money for a certain period, say three months).

      Reply
  3. August 02, 2013 at 11:53 am, Kevin said:

    Is there tax payable on amounts transferred to a living annuity?

    If at retirement I transfer my pension and provident funds to a living annuity, is there tax payable at that point?

    Reply
    • August 05, 2013 at 10:45 am, 10X Investments said:

      Kevin,

      There is no tax payable on amounts transferred to a living annuity. You will be taxed on the income you receive from the living annuity per the income tax table.

      Reply
  4. August 02, 2013 at 12:47 am, DV said:

    How to get hold of your income tax certificate

    How do I get my income tax certificate?

    Reply
    • August 05, 2013 at 10:43 am, 10X Investments said:

      DV,

      You need to request this from the administrator of your RA (ie Sanlam, Old Mutual, Momentum, Allan Gray, or whoever it is).

      Reply
  5. August 01, 2013 at 2:13 pm, Hermanus said:

    How to access your retirement annuity?

    On 2/1/2013 I turned 55 and now I want access to my retirement annuity; how do I go about it and how much will I receive? Thanks

    Reply
    • August 05, 2013 at 10:12 am, 10X Investments said:

      Hermanus,

      You need to pose these questions to the administrator of YOUR retirement fund/RA; we have no insight into your savings arrangements.

      Reply
  6. August 01, 2013 at 10:42 am, Jass said:

    Determine your monthly annuity pay-out

    Hi, I have an annuity with Old Mutual. It will mature in 3yrs time (assume the fund value is 300).
    I think I can get 100 tax-free – can I get a pension of R50 00 per month, receiving all my monies in a year?

    Reply
    • August 01, 2013 at 1:34 pm, 10X Investments said:

      Jass,

      To answer your question definitively, we would need to know your gender and your age. Given your name and that your RA matures in three years time, let’s assume you are a 52-year female. Using the 10X Retirement Calculator, and assuming that we are 3 years from now, you would input the following: gender – female, birth date – 30 June 1958; current retirement savings R200 000.

      In other words, we are assuming you have just turned 55 (which means you would have been born in 1958) and that you are using R200 000 to buy a pension. We can put in random numbers for your salary and contribution level as you would have stopped contributing at age 55, and because we are targeting a specific pension amount rather than an income replacement ratio.

      Using these (strong) assumptions, your monthly pension would only be R700 per month (that’s seven hundred rand per month).

      Please visit the calculator and play around with these assumptions, if they are false. But think about it logically: if you received a pension of R5 000 per month, that would come to total receipts of R180 000 within three years, almost the full value of your R200 000 investment. But at 55, you should, on average, live another 25-30 years or so. The lfe insurer paying your pension factors in your life expectancy, so the younger you retire, the less your annuity will pay out.

      Reply
  7. July 30, 2013 at 8:37 am, Chris said:

    Seized retirement annuity contributions

    I received a doc that states my contribution stopped and I am not aware of this.

    Reply
    • July 30, 2013 at 2:09 pm, 10X Investments said:

      Chris,

      Please forward your query to the administrator who looks after YOUR fund. We only administer clients who invest with us (ie 10X Investments).

      Reply
  8. July 29, 2013 at 11:01 pm, Sean said:

    Retirement annuity tax

    Hi there,

    I moved to the UK in December and cashed in my RA before I left. I had only been contributing for a year so the total wasn’t much over the R22 500 tax-free allowance.

    Do I have to declare this as income on my tax return?

    Many thanks,
    Sean

    Reply
    • July 30, 2013 at 2:06 pm, 10X Investments said:

      Sean,

      You could only have withdrawn from your RA (ie receive the cash) before age 55 if a) the fund balance is less than R7 000 or b) you have formally emigrated. Judging by your question, you must have emigrated, otherwise you would not have been able to access your cash (seeing it was more than R22 500).

      Your RA pay-out would have been subject to a tax directive, and any tax would have been deducted before paying you out the balance. Depending on your tax form, you may have to declare the amount received, but you do not owe any more tax on this money.

      Reply
  9. July 29, 2013 at 6:18 pm, Alex said:

    Retirement fund tax

    I have 4.5 million in my provident fund. I will be taking early retirement at 62 and buy a living annuity with the whole sum. Will SARS still tax me or will it be tax exempt with only my drawdown taxable?

    Reply
    • July 30, 2013 at 2:02 pm, 10X Investments said:

      Alex,

      You will not be taxed on the transfer to the living annuity, but you will be taxed on the income you receive from the living annuity per the income tax tables.

      But remember that the first R315 000 of a cash fund lump sum you take at retirement is not taxed, so if you have not previously withdrawn from a retirement fund, you should consider taking that portion as a cash lump, to save some tax during your first year in retirement (ie you could draw down just the minimum 2.5% in your first year and use the R315 000 to fund the balance of your income needs).

      Reply
  10. July 29, 2013 at 4:59 pm, Tiisetso said:

    How to get hold of your retirement tax certificate

    How can I get my retirement tax certificate?

    Reply
    • July 30, 2013 at 2:00 pm, 10X Investments said:

      Tiisetso,

      You need to request this from the administrator of YOUR retirement or RA fund.

      Reply
  11. July 29, 2013 at 3:40 pm, Virginia said:

    How to determine the total of your fund contributions

    1. I want to change my surname from Pheko to Lechoenyo. I personally went with my marriage certificate and Id to change the particulars @ Mafikeng today, but no change has been made.
    2. How much have I contributed to date?

    Reply
    • July 30, 2013 at 1:55 pm, 10X Investments said:

      Virginia,

      You need to advise your own fund administrator of these changes. Based on your e-mail address, this should be the Government Employees Pension Fund.

      Reply
  12. July 29, 2013 at 1:09 pm, Vivian said:

    Can dividends form part of your non-pensionable income?

    Can one include dividends as part of non-pensionable income to calculate the 15%?

    Reply
    • July 30, 2013 at 12:46 pm, 10X Investments said:

      Vivian,

      No, you can’t. Dividends are taxed by way of a withholding tax, and you receive the net amount, which does not fall into your taxable income. You cannot claim a RA deduction against income that is not subject to income tax, as this creates an assessed loss on such income, which is not permitted. For the same reason you can only claim RA deductions against interest income above the R23 800 interest exemption.

      Reply
  13. July 29, 2013 at 12:02 pm, Joe said:

    Can you claim past annuity contributions as a tax deduction?

    I contributed to a retirement annuity in the tax year ending Feb 2012, but forgot to claim my contributions as a tax deduction. Can I claim these contributions in the tax year ending Feb 2013?

    Reply
    • July 29, 2013 at 1:46 pm, 10X Investments said:

      Joe,

      This topic creates some confusion. Our law permits contributions that cannot be claimed in any tax year (because they exceed the limit of 15% of non-pensionable income) to be carried forward. These can be claimed in future tax years, subject to the prevailing tax limits in those years.

      Our law also refers to arrears contributions, which can be claimed subject a limit of R1 800 pa. This refers to an additional current year contribution that is related to a previous tax year in which you didn’t claim your maximum allowable deduction. This extra contribution of R1 800 can be claimed annually in respect of all previous years in which you did not claim your full 15% (of non-pensionable income) deduction. So you could make a top-up contribution of R1 800 this tax year (above your legal maximum allowed) and claim it in respect of the previous tax year.

      In you case, you did not claim a contribution in the previous tax year, and you are not making a contribution in the current tax year related to a previous tax year. This means you cannot deduct the unclaimed prior year contribution for tax in the current, or in future years.

      The proper way to deal with this would be to request SARS to reassess your prior year tax, or at least to carry forward the contribution to future tax years. In any event, you do need to engage them on this matter. Even if they do not permit the deduction, they must at least add the unclaimed deduction to your tax-free lump sum at retirement.

      Reply
  14. July 26, 2013 at 3:02 pm, 10X Investments said:

    Do you receive a tax certificate when you take out an RA?

    Hi, I took out an RA in June – do I get a tax certificate for it?

    Reply
    • July 29, 2013 at 10:07 am, 10X Investments said:

      Yaneetha,

      Not if it is in June of this year; the tax year ends February so you can only claim this year’s contribution in the 2014 tax year.

      Reply
  15. July 26, 2013 at 1:55 pm, Soraya said:

    How to get hold of your tax certificate

    How to I go about to get my tax certificate?

    Reply
    • July 29, 2013 at 10:04 am, 10X Investments said:

      Soraya,

      Contact your RA administrator and request your certificate.

      Reply
  16. July 25, 2013 at 1:58 pm, Ntokozo said:

    Can you use your benefit statement for tax claims?

    Hi
    I’ve got a five-year investment with Sanlam which is due October 2015. In the meantime I receive benefit statements every year – it’s written “for tax returns”. I’m asking if I can claim my tax back using this benefit statement?

    Thanks

    Reply
    • July 26, 2013 at 11:17 am, 10X Investments said:

      Ntokozo,

      You can use this for tax, but only to substantiate your investment income, on which you may have to pay tax. You cannot claim any deductions for this investment.

      Reply
  17. July 25, 2013 at 11:33 am, Melody said:

    Is non-retirement funding income claimable?

    Can one claim non-retirement funding income?

    Reply
    • July 26, 2013 at 11:26 am, 10X Investments said:

      Melody,

      You can claim up to 15% of your non retirement funding income in respect of your contributions to a RA.

      Reply
  18. July 24, 2013 at 2:13 pm, George said:

    Is it possible to split retirement capital amongst different funds?

    I believe that buying an annuity with retirement capital is compulsory and it is also not allowed to transfer the benefits to a preservation fund when I retire from employment.

    Would it be possible to split the retirement capital, buy an annuity with part of it and use the remainder to make an once-off contribution to an Old Mutual Flexipension Policy that only matures 5 years after receiving the retirement benefits at retirement?

    Reply
    • July 25, 2013 at 8:00 pm, 10X Investments said:

      George,

      What you can and have to do with your retirement capital depends on the nature of your capital and your age.

      If you are invested in a provident fund pre-retirement, you can withdraw the full amount as cash once you retire (from the age of 55 onward) and do with it what you wish.

      If you are invested in a RA, you must buy an annuity with at least two-thirds of you RA balance once you claim. You have no other options. You can only claim from the age of 55 onward.

      If you are invested in a pension fund, you can withdraw from the fund pre-retirement (on resigning from your employer) and take the full amount as cash, or transfer it to a preservation fund, until you reach the normal retirement age per the fund rules. from that age, you must retire from the fund on retiring from your employer. This means that you again must use two-thirds of your capital to buy an annuity. At that point you can no longer preserve your savings, or withdraw and claim the full amount as cash.

      If you own a RA or pension fund, you can only use your one-third cash portion to invest in the Old Mutual product.

      Reply
  19. July 24, 2013 at 11:45 am, MJ said:

    What happens to your retirement annuity when you become unemployed?

    Hi, MJ Phofi here. I am no longer employed, I am now unemployed. What’s going to happen with my retirement annuity?

    Reply
    • July 25, 2013 at 7:53 pm, 10X Investments said:

      MJ,

      That’s up to you. You can continue to contribute; but if you no longer earn any income, that may be difficult. Some RAs are flexible and will allow you stop contributing temporarily, until you find a new job and can resume contributions. Others – many life companies included – are less so, and will require you to make your RA paid-up. This means you may incur a termination penalty. If the RA value after that penalty is below R7 000, you can withdraw the money, if not, it will stay invested, and you cannot claim until you turn 55.

      Reply
  20. July 24, 2013 at 11:37 am, Bhekani said:

    How do I go about submitting documents to SARS?

    I want to submit the medical and retirement forms that prove I do not owe SARS money. Which e-mail can I use to do this?

    Reply
    • July 25, 2013 at 7:49 pm, 10X Investments said:

      Bhekani,

      Your best bet is to visit the SARS e-filing web site, register, and then upload the required documents directly from your PC. Otherwise, we refer you to the following instruction on their site:
      “Should you have issues regarding payments or returns that were not submitted through the e-filing website, then please call 0800 00 SARS (7277) or visit your nearest SARS branch: http://www.sars.gov.za.”

      Reply
  21. July 24, 2013 at 11:15 am, Anton said:

    What can you do with a “paid-up” pension fund?

    What can I do with a “paid-up” pension?

    Reply
    • July 25, 2013 at 7:56 pm, 10X Investments said:

      Anton,

      The term “paid-up” usually refers to a RA rather than a pension; it describes a RA policy that no longer receives contributions. The money remains invested but cannot be accessed until the holder turns 55, unless the balance is less than R7 000, or the holder formally emigrates or retires early due to ill-health.

      Your options are to do nothing until you reach 55 (or any date thereafter that you decide to claim), at which point you must buy an annuity with two-thirds of the fund value. Or you can try revive the RA and resume contributions (some RAs may allow you to do so). Or you can transfer the proceeds to another RA provider that charges lower fees or offers a more sensible investment strategy.

      Reply
  22. July 23, 2013 at 10:27 pm, Florence said:

    Can you cancel your retirement annuity?

    Can a person cancel a retirement annuity and take his/her money back?

    Reply
    • July 25, 2013 at 7:42 pm, 10X Investments said:

      Florence,

      You can make your RA paid-up (which means you stop contributing). If this is a life company RA, you will probably incur a termination penalty (an accelerated recovery of upfront fees). If the subsequent paid-up value of your RA is below R7 000, you can claim your cash. Otherwise you have to wait until you turn 55, to access your money.

      Reply
  23. July 23, 2013 at 1:55 pm, Pieter said:

    What is the difference between a committed RA and a non-committed RA?

    I have an Old Mutual RA which is apparently a committed plan. I wanted to make some frequent additional payments to boost the RA, which is apparently not allowed. They say I need to take out a plan B, which will be separate from my current RA. What does a plan B mean, and what is the difference between a committed RA and a non-committed RA?

    Reply
    • July 23, 2013 at 4:48 pm, 10X Investments said:

      Pieter,

      To be honest, we have never heard of a committed RA. From your question, we can only infer that it refers to a highly inflexible RA product that does not permit any deviation from the original policy terms. In other words, you have fully committed to the agreed terms and cannot deviate from them in any way. This may have conferred an upfront fee advantage. It sounds like the cheapest airline ticket on offer, but which does not permit any changes after you have paid for it.

      So, in order for you to increase your contribution, or make top-up payments you have to take out another RA (buy another ticket). The potential problem with such an arrangement is that you then duplicate certain costs – such as admin fees – and that you possibly incur additional “financial advice” fees.

      Reply
  24. July 22, 2013 at 2:54 pm, A.R Wormald said:

    Where can I get my retirement annuity certificate for tax purposes?

    Hi, wanting my retirement annuity certificate for tax. Thanks

    Reply
    • July 24, 2013 at 11:11 pm, Xoliswa said:

      Who should I contact for my RA tax certificate?

      Where can I get my certificate statement for tax purposes?

      Reply
      • July 26, 2013 at 11:27 am, 10X Investments said:

        Xoliswa,

        You must request this from the administrator of your RA.

        Reply
    • July 23, 2013 at 2:15 pm, 10X Investments said:

      Mr(s) Wolmald,

      Please contact the administrator of your RA fund directly.

      Reply
  25. July 22, 2013 at 11:56 am, R C Gevers said:

    Whom do you contact to request your tax certificate?

    Please mail my tax certificate for ending February 2013 ASAP.
    I need it urgently for my auditors!

    Reply
    • July 22, 2013 at 12:44 pm, 10X Investments said:

      Mr Gevers,

      Please contact your RA administrator directly to request this certificate.

      Reply
  26. July 22, 2013 at 11:23 am, Reema said:

    Can you make a withdrawal from your retirement annuity?

    Are you allowed one draw from your retirement annuity?

    Reply
    • July 22, 2013 at 12:36 pm, 10X Investments said:

      Reema,

      No, you are not. At retirement (above age 55), you are allowed to take one-third as cash however.

      Reply
  27. July 22, 2013 at 10:58 am, Pikkie said:

    How is an annuity death benefit paid out to dependents?

    My Husband died last year and now the insurance company came back to me saying the following. He had a retirement annuity with them. Please advise what this means and what I will need to have it sorted out.
    Thank you kindly

    Please be advised that the tax directive was declined with the reason as follows from SARS:
    Date of accrual cannot be greater that estate date
    1452 Directive Tax Year is greater than Estate Tax Year

    Please contact your nearest SARS office to resolve the matter and let us know when this is resolved.

    Reply
    • July 22, 2013 at 12:39 pm, 10X Investments said:

      Pikkie,

      A retirement annuity is a retirement fund for individuals. If the holder of the RA dies while still a member, the RA will pay out a so-called “death benefit”. The trustees will decide how the money should be allocated – they have a duty to ensure that all your late husband’s financial dependents are provided for. The main beneficiaries are usually the wife and minor children, but it may include other persons dependent on your late husband for financial support (eg his parents, if he supported them).

      Each beneficiary can choose how they want to receive their share of the benefit, either as a cash lump sum, or as an annuity. Any cash lump sum is taxed as though it had been received by your late husband, any annuity income is taxed in your hands. You need to instruct the insurance company of your decision.

      Regarding the second part of your question, there appears to be a problem with the dates submitted. It appears that the date used to requests a tax directive on the RA was later than the date at which the value of your late husband’s estate was determined. You should contact SARS to find out how to resolve this issue.

      Reply
  28. July 22, 2013 at 10:49 am, DJC said:

    Can an employer force you to join their Group RA scheme?

    My employer insists that it is compulsory to take out an RA with their preferred provider. They do not make any contributions and insist that the minimum monthly contribution be 7.5% of your cost to company package. Is this legal?

    Reply
    • July 22, 2013 at 12:33 pm, 10X Investments said:

      DJC,

      The RA is a contract between the RA provider and the individual. The RA travels with you when you leave. Group RAs are designed to facilitate the administration of contributions (ie contributions are deducted through the payroll) but in essence it remains a retirement fund for individuals. Some employers choose this scheme to give employees the option to join or not, and to choose their own contribution rates (that kind of flexibility is not available through a pension or provident fund).

      The arrangement you describe does not appear legally enforceable, but it may form part of your employment contract.
      It is certainly not an ideal set-up, and, quite frankly, appears suspect. If your employer wants to force employees to save, he should launch a provident or pension fund.

      This Group RA is a much less flexible arrangement than a pension or provident fund. If you leave your employer, you cannot cash in your RA until you turn 55. Chances are high you will pay a termination penalty if you make the RA paid up or transfer it to another provider. You are also likely to be paying a much higher fee than you would in a normal group scheme (and fees can have a dramatic impact on your long term savings outcome).

      You should query a) whether this mandatory under your employment contract b) what fees you are paying (you should not be paying more than 1% pa, although you may well be paying up to 3% pa) and c) whether your employer benefits from this arrangement in any way (ie through the receipt of broker commissions, for example, in return for passing through all these involuntary clients).

      Reply
      • July 22, 2013 at 12:56 pm, DJC said:

        I agree that this compulsory membership does seem suspect, as the following passage was in their Benefits Scheme document:
        “This is a simple product without the complexity of many existing group retirement funds.
        A Company Pension/Provident fund is a Group investment which is less flexible with higher administrative costs.”

        Reply
  29. July 22, 2013 at 8:56 am, Jennifer said:

    Withdrawing your annuity as a lump sum

    I have an RA with Old Mutual. Policy matured May 2012. I took R10 000. The matured value was R71 000. Invested by a consultant from Max Invest.
    I receive R450 per month from this investment.
    I would like to know if the investment could be paid out to me as I am no longer employed.

    Reply
    • July 22, 2013 at 11:15 am, 10X Investments said:

      Jennifer,

      You should contact your consultant in this matter. Given that the maturity value was less than R75 000 and assuming this is your only RA, then you were entitled to withdraw the full amount of your RA as a cash lump sum. If you used the balance of your RA to buy a conventional annuity, then you effectively bought an insurance policy. This is guaranteed to pay out for the remainder of your life, but you no longer have the option to cash it in. If you used the balance to buy a living annuity, then you do retain some control over your money. As your RA value was less than R71 000, you still have the option to cash in whatever is left of your living annuity.

      Reply
  30. July 20, 2013 at 6:30 pm, Elna said:

    Can you transfer a retirement annuity?

    Can a retirement annuity be transferred to another person?

    Reply
    • July 22, 2013 at 11:23 am, 10X Investments said:

      Elna,

      In terms of s37A Pension Funds Act, a RA cannot be transferred, ceded or pledged.

      Reply
  31. July 19, 2013 at 3:20 pm, Cindy said:

    Is your employer’s fund contribution a taxable fringe benefit?

    If an RA is part of a Group RA scheme wherein it is a Group RA Scheme rule that all employees must be members of the scheme and make contributions to it, (just like a group pension or provident scheme), and the employer is required to make contributions in terms of the scheme rules, then I think the employer’s contribution is probably not a taxable fringe benefit.
    I wonder if this interpretation of mine is correct?

    Reply
    • July 22, 2013 at 9:59 am, 10X Investments said:

      Cindy,

      Even within a Group RA scheme, the contract is still between the individual and the provider. Membership to a Group RA scheme is therefore not compulsory from a tax perspective, although the employer may specify or require this in the employment contract.

      Only individual are allowed to deduct contributions to a RA. If the employer makes the contribution, then this must be taxed as a fringe benefit. The employee can offset the fringe benefits tax by claiming the employer’s contribution as an income tax deduction.

      Reply
  32. July 19, 2013 at 12:45 pm, Leza said:

    Are you being overtaxed on your retirement annuity?

    Hi

    I receive an income from my late husband’s living annuity of R4 500 a month (around R54 000 a year). I also work and receive R4 000 a month (R48 000 a year), so my gross annual income is about R102 000.

    Am I correct to assume that my taxable income should be around R35 000? (R102 000 less the individual tax threshold of R67 000 for persons under the age of 65). Thus my tax bill should be 18% of R35 000 which is R6 300?

    My living annuity provider is deducting 18% off my annuity income at source before the tax threshold is applied, hence I think I am overpaying in tax. How can I reclaim this?

    Thanks

    Leza

    Reply
    • July 22, 2013 at 9:40 am, 10X Investments said:

      Leza,

      Your taxable income is R102 000, on which you have to pay tax at 18%, ie R18 360. Off this you can deduct the rebate of R12 080, which means you owe tax of R6 280. So your answer is correct, but your terminology is a bit off.

      You can claim this money back by submitting a tax return. To do so, you have to register at SARS e-filing, and for this you will require a tax number. If you don’t have one, you need to contact your local SARS office and authenticate yourself.

      For future years, to avoid the negative cash flow impact during the year, you should request a tax directive from SARS that will allow your living annuity provider to deduct tax at less than the minimum 18% tax rate.

      Reply
  33. July 19, 2013 at 12:18 pm, Welamaza said:

    Where can you get your retirement annuity tax certificate?

    Can you please send me my retirement annuity tax certificate for submission to SARS.

    Reply
    • July 19, 2013 at 12:24 pm, 10X Investments said:

      Welamaza,

      You must request this from your RA administrator.

      Reply
  34. July 19, 2013 at 9:23 am, Uganderan said:

    How to get a IT3a tax certificate

    I need a IT3a tax certificate from Old Mutual. Who can I contact to get this certificate?

    Reply
    • July 19, 2013 at 12:11 pm, 10X Investments said:

      Uganderan,

      Your best bet is to contact Old Mutual. For example, you can register at Old Mutual MyPortfolio and then view detailed information on your policies and investments, including copies of your annual statements, policy contracts and income tax certificates.

      Reply
  35. July 18, 2013 at 2:36 pm, Bonisiwe said:

    Where can you get your retirement certificate?

    How do I get my retirement certificate?

    Reply
    • July 19, 2013 at 11:12 am, 10X Investments said:

      Bonisiwe,

      You need the contact the administrator of your retirement fund directly, and request the certificate if it has not been sent to you already. Your policy documents will give you the name and contact details of your administrator.

      Reply
  36. July 18, 2013 at 8:39 am, Gavin said:

    Claiming retirement annuity tax contributions

    My wife is currently unemployed and I am paying her RA on her behalf. Can I claim my contributions to her RA back on my tax return?

    Reply
    • July 19, 2013 at 11:08 am, 10X Investments said:

      Gavin,

      If the RA is in your wife’s name then you cannot claim the contributions. Your wife can carry forward these unclaimed contributions and claim them in future years, once she earns an income again.

      Reply
  37. July 17, 2013 at 9:14 pm, Mr J Jasson said:

    Where can you get your RA tax certificate?

    I urgently require my RA tax certificate. My policy is 4214096558.
    Please email urgently.

    Thank you

    Reply
    • July 19, 2013 at 11:05 am, 10X Investments said:

      Mr Jasson,

      You need to request this certificate directly from your RA administrator.

      Reply
  38. July 17, 2013 at 4:33 pm, Patricia said:

    How to determine your death benefit

    If my dad was paying R501 per month and he was involved in a car accident, how much will the death claim pay out?

    Reply
    • July 19, 2013 at 11:02 am, 10X Investments said:

      Patricia,

      If this claim arises from retirement fund death benefit, you should direct this query to the fund administrator. The amount will depend on the number and value of contributions made, the gross investment return earned on these contributions and the fees deducted. If the fund also included life cover benefit, then the insurance benefit would be a multiple of your late father’s salary (as per the agreed terms). If the claim relates to a life insurance policy, it will depend the policy terms. In this case you need to contact the life insurance company.

      Reply
  39. July 16, 2013 at 1:42 pm, Khurshid said:

    How to go about cashing in your retirement annuity

    I am at a retirement age and I need my retirement annuity. How do I go about taking it out and what % tax do I pay and when must it be paid?

    Reply
    • July 16, 2013 at 2:03 pm, 10X Investments said:

      Khurshid,

      You need to lodge a claim with your RA administrator, by filling in and submitting the required retirement form. With an RA, you have the option to take one-third as cash, you must use at least two-thirds to purchase an annuity. This is either a conventional or a living annuity. A conventional annuity will guarantee you an income for life but your capital dies with you (unless you pay for a spousal survivor benefit). With a living annuity, your retain some control over your money, but you assume investment and longevity risk, ie the risk that you will outlive your savings. However, on your passing, the balance of your living annuity is paid to your nominated beneficiaries.

      The RA administrator may offer to transfer your two-thirds annuity portion to the provider of their choice. If this is a life company RA, and you choose a conventional annuity, they will most likely suggest that you purchase one of their in-house products. You don’t have to buy this product however; rather, you should shop around for the best rates. The price of a conventional annuity changes over time (depending on what interest rates are doing) and also differs among providers. So you should find the best rate going at the time.

      Reply
  40. July 16, 2013 at 9:34 am, Johan said:

    Retirement fund contribution tax

    My company owes me about R2m in arrears bonuses which is carried against a loan account. It is paid to me at a rate of R40k per month on which I pay tax monthly. Instead of having this paid in this manner, I want to have the R40k per month paid as a voluntary contribution to my pension fund deferring the tax to after retirement. My pay office says that the R40k per month is taxable before being paid as a voluntary contribution into my pension fund. I differ since I believe that I cannot pay tax now and again when I retire on the same amount. Which view is correct? Do you have a reference for me in this regard
    to convince my pay office?

    Reply
    • July 16, 2013 at 11:37 am, 10X Investments said:

      Johan,

      In terms of the Income Tax Act you are allowed to deduct 7.5% of your gross remuneration in respect of YOUR contributions to your pension fund (your employer is allowed another 20%). So if you are already deducting 7.5% of your salary, then you cannot deduct the full R40 000 thereafter as well, only 7.5% of the R40 000.

      But the definition of your gross remuneration or pensionable salary depends on your special or specific fund rules. So if your bonus payment falls outside your pensionable salary, then you cannot even deduct 7.5% of the R40 000. Then your payroll department is right – the full amount is taxed, before you make any voluntary top-up contributions to your pension fund.

      The good news is is that you do not pay tax twice on this amount. If you did not receive a tax deduction on a contribution, then that amount is returned to you tax-free. Either it is added to the tax-free portion of your cash lump sum (presently the first R315 000 of your cash lump sum is not taxed), or, if you choose to convert your full retirement savings into an annuity, the unclaimed contributions are deducted off your annuity income for tax purposes.

      Reply
  41. July 16, 2013 at 5:33 am, Fanie said:

    How to increase your retirement income

    Goeie dag.
    Ek stel belang om my aftrede se inkomste te verhoog. Kontak my per epos of 0825529194.

    Fanie Slabber

    Reply
    • July 16, 2013 at 11:32 am, 10X Investments said:

      Fanie,

      We do not provide personal investment advice on this site. The issue of achieving a higher income is not so simple, as a higher income invariably entails greater risk that you will not earn that income, or that you may lose part of your capital. Without knowing your personal and overall financial situation, it is not possible to offer you ANY specific input.

      Generally, if you want to increase your retirement income, you should seek to increase your pension pot before retirement. Our Financial Education section explains the key investment principles you need to consider, to optimise your retirement saving.

      If you have already reached retirement age, and you have purchased a conventional annuity, then you have locked into that income, and there is nothing to be done. If you are invested in a living annuity, you need to consider your fees, asset allocation and sustainable draw-down rate; this is a technically complex area, and you should consult a financial adviser if necessary. Without doing a proper needs analysis, we cannot provide you with any specific input in this regard.

      The same applies if you drew your retirement benefit as a cash lump sum. You need to find the asset allocation that is appropriate for your income needs, you need to keep a close eye on your fees, and you need to consider how much you draw down on your savings in the context of how much you have saved, and how long you believe this money will have to last.

      Reply
  42. July 15, 2013 at 1:32 pm, Martin said:

    Can you cash in your RA before age 55 whilst receiving a disability pension?

    I was medically boarded in 2007. I have had a retirement annuity with Metropolitan since 1989. I did report to them in 2007 and they said the policy is fully paid. I called them today and was told I must wait for age 55 or death. When I retired I was 39 years. Does it really work that way?

    Reply
    • July 15, 2013 at 2:19 pm, 10X Investments said:

      Martin,

      If you are receiving a disability pension, then you will not be able to cash in your RA before age 55. But if you have retired early due to ill-health, without any benefits, and you can prove it to Metroploitan’s satisfaction (you may have to go for more medical tests), then you should be entitled to claim your RA before the age off 55.

      Reply
  43. July 13, 2013 at 12:41 pm, Pieter said:

    The 10X Retirement Calculator explained

    Does your retirement calculator assume that a fixed income is bought on retirement, or will it escalate at a specific rate?

    Reply
    • July 15, 2013 at 9:53 am, 10X Investments said:

      Pieter,

      The 10X Retirement Calculator assumes that you will purchase an annuity that grows in line with CPI inflation.

      Reply
  44. July 12, 2013 at 3:04 pm, Johan said:

    How to obtain your retirement annuity tax certificate

    How can I obtain my retirement annuity tax certificate for submission to SARS?

    Reply
    • July 12, 2013 at 3:14 pm, 10X Investments said:

      Johan,

      The best way is to contact the administrator of your RA investment, by phone or e-mail, and request this information. These certificates are usually sent out automatically, so you may want to ensure your contact details on their system are correct.

      Reply
  45. July 12, 2013 at 5:42 am, Don said:

    Are you paying too much in retirement annuity fees?

    In addition to my previous comments about the RA fees.
    I also see there are management fees of 0,25% p.m (3% p.a).

    Reply
    • July 12, 2013 at 12:14 pm, 10X Investments said:

      Don,

      Please refer to our previous answer. Charging an additional management fee of 3% pa is quite outrageous. We believe this fee will also reduce after 5 and 10 years, but even at say, 2% pa, it would be way too high.

      To compare: the 10X RA charges just one all-in fee of 0.9% pa (plus VAT), which reduces once the fund balance exceeds R1m. There is no commission recovery, no admin charge and we NEVER levy a termination penalty.

      Please feel free to contact Salie Petersen (10X retail consultant) at 021 412 7631 for a free fee comparison.

      Reply
  46. July 12, 2013 at 5:06 am, Don said:

    Understand the impact of the cost structure of your retirement annuity

    I have the retirement annuity builder product which says it charges an ongoing commission recovery fee of 0,125% per month (1,5% p.a) for 5 years.

    Is this expensive? It also says that after the 5 years 5,7% of the regular premium payable will be deducted per month after that. I don’t understand how the costs increase.

    Is this expensive and would I be penalised for switching? It says that the early termination fees reduce to 0,25% after 5 years?

    Reply
    • July 12, 2013 at 12:13 pm, 10X Investments said:

      Don,

      The impact of fees gathers momentum as the investment term lengthens, as it compounds. When you take out an RA, you should seek to find one that will not charge more than 1% pa over the lifetime of your investment.

      You are already paying 1.5% pa to cover the broker’s commission, at least for the first five years. Thereafter the commission rate drops, to say 0.8% pa (depending on the fund balance). As your fund grows, it will continue to fall, as a % of assets. We don’t have enough information to estimate the reduction in yield over the life of the product but the longer you hold it, the lower it will be.

      But you will also be paying ongoing management fee, and you may be paying an additional guarantee and asset manager fee. We would estimate that your reduction in yield will be above 2% pa, which makes this product more expensive than it has to be.

      You would be penalised for switching within the first five years as the provider will have to recover the commission costs anyway (having paid the broker upfront).

      Reply
  47. July 10, 2013 at 1:53 pm, Marsha said:

    Your options when your RA value just exceeds R75K

    I have an RA to the value of R77 616.75 and turned 55 in June. According to the insurance company the amount of R25 875.71 less tax, depending on the directive, will be available to me. They sent me a form: Compulsory Purchase Life Annuity (which I need to buy from another insurance company) to complete since they will not be able to assist after pay-out. My question is that the balance of 2/3 will be less than R75 000.00 and I have not previously withdrawn or retired from any other fund. Can I claim the entire balance as cash lump sum?

    Reply
    • July 12, 2013 at 11:45 am, 10X Investments said:

      Marsha,

      At present, investors are not required to purchase an annuity if the total RA value at retirement is R75 000 or less. As your total value (R77k) is just above that, you do not qualify for this exemption.

      You do have a couple of options. Firstly, under pending retirement reform, the minimum RA value required to buy an annuity will increase from R75 000 to R150 000. This reform, if it happens, will only come into effect from 2015, so you would have to be a bit patient.

      Alternatively, you could choose to buy a living rather than a compulsory annuity with the two-thirds, if you are permitted to do so by the RA rules. A living annuity is a draw-down account, requiring you to draw down between 2.5% and 17.5% pa. However, our tax law allows investors to draw the full amount once the capital balance drops below R50 000.

      You would be transferring in R51 741. After initial fees, you would probably fall below R50 000 straight away, so you could then withdraw immediately. Your challenge would be to swallow the high fees you would be charged for this and to find a provider who would accept such a small transfer go through the motions on this with you.

      Reply
  48. July 10, 2013 at 12:11 pm, Gugu said:

    Are emergency loans from your retirement fund allowed?

    Is the one-third pay-out you receive part of the withdrawal you are allowed, because I have an emergency and need to make a withdrawal from my retirement plan. Is it possible to get a loan from your retirement plan if it’s an emergency?

    Reply
    • July 10, 2013 at 1:01 pm, 10X Investments said:

      Gugu,

      No, the one-third cash portion is not the equivalent of an early withdrawal. You can only receive this cash portion when you claim your benefit, which, generally, you can only do once your turn 55. You may also not borrow money from your RA. It is possible to borrow money from a pension or provident fund, if the rules permit, and if the loan is housing-related. Emergency loans for other purposes are not allowed.

      Reply
  49. July 10, 2013 at 10:30 am, Hansi said:

    Does investing in an educational plan qualify for a tax deduction?

    I just want to find out, if I have an educational plan, do I qualify for a tax certificate?

    Reply
    • July 10, 2013 at 12:17 pm, 10X Investments said:

      Hansi,

      Unfortunately, investing in an educational plan does not qualify for a tax deduction. Such deductions are generally limited to retirement fund and medical aid contributions, and to premiums in respect of income protection plans.

      Reply
  50. July 09, 2013 at 2:52 pm, Merwede said:

    Does the Tax Act set a minimum age?

    Can a beneficiary that is a minor get taxed on an annuity that was from her father who passed away? The minor lives with people but they are not her legal guardians.

    Thanks
    Merwede

    Reply
    • July 10, 2013 at 9:15 am, 10X Investments said:

      Merwede,

      Individuals under 65 are liable to pay income tax if they earn more than R63 556 in the 2013 year of assessment. The Tax Act does not set a minimum age.

      PAYE is deducted at source in accordance with the SARS tax tables. In the event that an investor/annuitant requires a lower percentage of tax to be deducted from their annuity payment, they must obtain a tax directive from SARS.

      Reply
  51. July 09, 2013 at 1:58 pm, Gaseitsiwe said:

    Where can you get a tax certificate?

    I have a retirement annuity policy with Metropolitan. I need a tax certificate, what must I do?

    Reply
    • July 09, 2013 at 2:30 pm, 10X Investments said:

      Gaseitsiwe,

      You must contact Metropolitan, either by way of email (info@metropolitan.co.za) or by phone (0860 724 724) and request your tax certificate, if they have not sent this to you already. Be sure to have your policy number at hand.

      Reply
  52. July 09, 2013 at 9:54 am, Sithembile said:

    I have IRP5 and retirement annuity only the medical aid registered under my husdand (main member) I am his spouse on it. Please advise if there are chances that I will refund from SARS.
    Thank you.

    Reply
    • July 09, 2013 at 2:10 pm, 10X Investments said:

      Sithembile,

      The refunds/deductions are only granted to the RA holder or main member of the Medical Aid. If you are the holder of the RA, you will get the tax deduction against your income; if your husband pays for the medical aid, only he will get the tax deduction against his income.

      You will get a tax deduction on your RA contribution if you are a tax payer and you earn non-pensionable income. Pensionable income is the income used by your employer to calculate contributions to the company pension or provident fund. If your employer does not have a pension or provident fund, then all your income will be non-pensionable. You can deduct up 15% of your non-pensionable income in respect of your contributions to an RA (limited, of course, to the amount of the actual contributions made).

      Reply
  53. July 09, 2013 at 9:45 am, Pete said:

    Does the R75 000 limit apply on a per RA basis or on lumping future RAs into the same pot?

    I have a lapsed/paid-up retirement annuity contract with Old Mutual that matures on 1 August with a value of R34 000. I have now been advised by Old Mutual that I am only permitted to withdraw one third of this due to my having a further RA but which only matures in 2018. Is this correct under the Tax Act? My understanding has been that the R75 000 limit applies on a per RA basis and not on lumping any future RAs into the same pot.

    Reply
    • July 09, 2013 at 1:57 pm, 10X Investments said:

      Pete,

      Some of the Income Tax provisions apply on an aggregated basis, especially when it comes to pension fund matters. This is one of those instances. It would otherwise be too easy to circumvent the provisions of the Income Tax Act (ie by taking out multiple RAs).

      Reply
  54. July 09, 2013 at 7:57 am, Thabo said:

    Can you withdraw from an annuity before it has matured?

    Hi

    How do I withdraw money from an annuity if it has not yet matured?

    Please advise.

    Regards,
    Thabo

    Reply
    • July 09, 2013 at 1:56 pm, 10X Investments said:

      Thabo,

      You can only cash in your RA if a) its paid-up value is below R7 000; b) your have retired early due to ill-health; or c) you are formally emigrating. Otherwise, you can only access your RA from age 55. You are then required to use at least two-thirds to purchase an annuity, unless the RA value is below R75 000.

      Reply
  55. July 09, 2013 at 7:55 am, Sylvia said:

    Where to het hold of your annuity tax certificate

    Please email me my annuity tax certificate. Thanx.

    Reply
    • July 09, 2013 at 1:54 pm, 10X Investments said:

      Sylvia,

      Unless you are a 10X client (in which case you should contact our administration department directly on 021 410 1010), you must refer this query to the administrator of YOUR fund.

      Reply
  56. July 08, 2013 at 7:08 pm, Alex said:

    How is a composite annuity structured?

    What is a composite annuity and how is it structured

    Reply
    • July 09, 2013 at 1:48 pm, 10X Investments said:

      Alex,

      We have already explained the composite annuity in two of our previous replies. It will be structured according to your preference, with one portion of your retirement fund capital invested in a living annuity and another in a conventional annuity. Subject to the terms and conditions of the provider, you can allocate how much you want to invest in each. You can choose your draw-down rate in the living annuity (between 2.5% and 17.5% pa) and how you want to invest this portion; and you can choose the type of conventional annuity you want (fixed level, growing with inflation, with our without a spousal benefit, a with-profit annuity etc).

      Reply
  57. July 08, 2013 at 9:39 am, Wayne said:

    Under which circumstances may you cash in your RA?

    Can I cash in my RA?

    Reply
    • July 09, 2013 at 1:42 pm, 10X Investments said:

      Wayne,

      You can only cash in your RA if a) its paid-up value is below R7 000; b) your have retired early due to ill-health; or c) you are formally emigrating. Otherwise, you can only access your RA from age 55. Uou are then required to use at least two-thirds to purchase an annuity, unless the RA value is below R75 000.

      Reply
  58. July 06, 2013 at 8:13 pm, Sisa said:

    Where to get your tax certificate

    Please e-mail me my tax certificate for 2012/2013.

    Reply
    • July 09, 2013 at 1:33 pm, 10X Investments said:

      Sisa,

      You must request this from your retirement fund administrator. Your email suggests you work for the government, so you should perhaps contact your HR department in this regard.

      Reply
  59. July 06, 2013 at 5:12 pm, Tony said:

    The rules of withdrawing from your annuity during retirement

    I received 1/3 of my annuity from Liberty when I turned 55. I Am now 62 and have an investment value of R186 000, but my circumstances have changed drastically. My wife passed away unexpectedly and I have no income, as I am unemployed and my family is supporting me. Is there any way I can access my annuity or portion thereof?

    Reply
    • July 09, 2013 at 1:27 pm, 10X Investments said:

      Tony,

      If you cashed in your annuity at age 55, this means you must have already used two-thirds to purchase an annuity, either a living or a conventional annuity. Given that you state an investment value of R186 000 this suggests that you purchased a living annuity. This allows you to draw between 2.5% and 17.5% of the remaining balance per year. So you should receive some income. You do not have the option to cash in the R186 000 (not until the value falls to below R50 000). You can convert the R186 000 to a conventional annuity, that pays out monthly, but the pay-out will likely be quite small (only around R1 000 per month). You could try to supplement this be applying for the State Old Grant, which pays out R1 260 pm.

      Reply
  60. July 05, 2013 at 1:21 pm, Kishore said:

    Are you compelled to take out another annuity?

    I am taking out one third of the value of my retirement annuity. Can I continue paying the installments without taking out another annuity? I am aged 60.

    Reply
    • July 08, 2013 at 9:38 am, 10X Investments said:

      Kishore,

      The answer is no. You can only claim your one-third cash lump sum if you claim your whole RA benefit. This then means you must convert at least two-thirds into an annuity (conventional or living) – you cannot keep the balance invested. Otherwise you could keep doing this and eventually withdraw your entire RA as a cash lump sum. If you want to continue saving (paying instalments), you will have to take out a new annuity.

      Reply
  61. July 05, 2013 at 12:09 pm, Maureen said:

    Can a beneficiary claim a matured retirement annuity?

    I am a beneficiary of a retirement annuity taken out by my ex husband in 1969 – this matures in August of this year and I need to know if I can claim. My ex husband has not be seen or heard from since 1985.

    Reply
    • July 09, 2013 at 12:49 pm, 10X Investments said:

      Maureen,

      If your husband is still presumed to be alive, then only he can claim the benefit. If he is presumed dead, the RA (in South African law – you have come to a South African web site) will pay out a death benefit. The trustees will allocate the death benefit – they have a duty to ensure that all financial dependents are looked after. The fact that you are the named beneficiary only matters if your husband did not leave any (other) financial dependents. A lot may have happened in your husband’s life since 1985 (including another family), so the trustees would order an investigation to find out more.

      To make a claim you will probably require a court order directing the registrar to issue a death certificate based on the available evidence. If you do not have such a certificate, it is unlikely that the administrator and trustees will allow the claim. The best thing is to contact the fund administrator, explain your circumstances and find out what they require (and propose to do), in terms of documentation and evidence, to effect a pay-out.

      Reply
  62. July 05, 2013 at 1:13 am, Alex said:

    Are you allowed to split your retirement capital among different annuities?

    Is it possible to split 2 thirds of my pension pay-out in order to buy a fixed annuity and a living annuity?

    Reply
    • July 05, 2013 at 10:58 am, 10X Investments said:

      Alex,

      Yes, this is possible. You are allowed to split your retirement capital among four different annuities, provided one annuity provides at least R150 000 of income per year, and the capital value of each annuity exceeds R25 000. You can also consider a composite annuity which provides access to a living and a conventional annuity under one policy. The split annuity requirements do not apply here as you are purchasing just one policy.

      As an aside, you can also convert a living annuity into a conventional annuity at a later date, but you cannot convert a guaranteed annuity into a living annuity. Also, once you have made your decision, you cannot then split your annuities (living or conventional). Also, you can transfer your living annuity to another provider, but not your conventional annuity.

      Reply
  63. July 04, 2013 at 8:30 am, Marsha said:

    The process of retiring from a retirement annuity

    I have an RA that has matured. The total value is R67 532.00. I know that the first R22 500 is “tax free”. Do I have to transfer the remaining balance to another fund or can I receive the lump sum (after tax)?

    Reply
    • July 04, 2013 at 11:59 am, 10X Investments said:

      Marsha,

      The first R22 500 of a retirement fund cash lump sum is tax-free if the holder or investor withdraws from the fund. You cannot withdraw from a RA (other than for reasons of emigration or ill-health), you can only retire from a RA (from the age of 55 onward). When you retire from a RA, then you are required to use at least two-thirds to buy an annuity, but this annuity requirement falls away if the total RA value is less than R75 000. On retirement, the first R315 000 of any retirement cash lump sum paid out is not taxed.

      What all of this means is that, provided you have not previously withdrawn or retired from any other retirement fund, you can claim the entire R67 532 as a cash lump sum, and you will not pay any tax on this amount.

      Reply
  64. July 04, 2013 at 7:45 am, Wynand said:

    Can you claim carried-forward RAF contributions indefinitely?

    I have a huge amount carried forward as RAF contributions on my IT34. Can you claim the 15% forever, even from your annual living annuity income until the unclaimed RAF contribution is depleted?

    Reply
    • July 04, 2013 at 11:55 am, 10X Investments said:

      Wynand,

      Under current law, you can continue to claim your carried-forward RAF contributions for as long as you have non-pensionable income to claim these against, and for as long as you do not claim your RA benefit. Once you claim your RA benefit, any previous RA contributions not claimed for tax will be added to the tax-free portion of your cash lump sum. If you do not claim the cash lump sum, but convert the full proceeds into an annuity, the unclaimed RA deductions can be deducted off your annuity income for tax purposes.

      In terms of the proposed retirement reforms, to be effective from or after 1 March 2015, investors will be allowed to claim up to 27.5% of their entire taxable income for retirement fund contributions. The distinction between pensionable and non-pensionable salary will fall away, which means you can then claim the entire 27.5% in respect of your RA contributions. Although this has not been clarified, it also suggests that this will enable you to accelerate the recovery of carried-forward RA contributions. These are merely proposals, however, and they have not yet passed into law.

      Reply
  65. July 03, 2013 at 1:13 pm, Liza said:

    Can you withdraw from your RA at any time?

    I have 2 RAs with Sanlam to the value of R40 000. I have not contributed to this plan since 2008 and want to know if I can withdraw this money at any time. I am only 41 of age.

    Reply
    • July 03, 2013 at 1:56 pm, 10X Investments said:

      Liza,

      The short answer is “no”. You can only access this money once you turn 55. For you, there are only two exceptions to this rule. These relate to early retirement due to ill-health and formal emigration.

      Reply
  66. July 03, 2013 at 9:57 am, Lee said:

    Can you sell your retirement annuity?

    I would like to know if an RA can be sold to another person? i.e. If the RA holder went bankrupt/insolvent estate, could they have sold their RA to a broker? If so, and if the first RA holder is now 55, who is entitled to the payout? Thanx

    Reply
    • July 03, 2013 at 11:47 am, 10X Investments said:

      Lee,

      The short answer is no. In terms of S37A of the Pension Funds Act, a RA is not “capable of being reduced, transferred or otherwise ceded, or of being pledged or hypothecated.”

      RA’s provide protection against creditors and cannot be attached (other than a maximum of R3 000, but only following a debt judgement). Only the holder, or their financial dependents (if the original holder has died) may receive the pay-out. Once the RA is paid out, the annuity (at least two-thirds of the RA value must be used to buy an annuity) is similarly protected. Of course, once the money has been received (ie either the one-third cash lump sum and/or the annuity income), then it merges with the holder’s other assets and can be attached. It is not compulsory to cash in a RA at maturity date.

      Reply
  67. July 03, 2013 at 7:38 am, Andrew said:

    What is the maximum deduction allowed in respect of arrear RA contributions?

    For various reasons I did not make the maximum 15% (of gross salary) contribution in the tax year 2012. Can I make tax deductible contributions now and in future years in respect of this omission?

    Reply
    • July 03, 2013 at 11:38 am, 10X Investments said:

      Andrew,

      You may deduct R1 800 pa in respect of arrear RA contributions. More is not permitted – in essence, you cannot not deduct current contributions against prior years’ income.

      Reply
  68. July 01, 2013 at 7:46 pm, Bonginkosi said:

    Where do I request your retirement tax certificate?

    May you please email me my retirement tax certificate.

    Reply
    • July 03, 2013 at 11:12 am, 10X Investments said:

      Bonginkosi,

      You are not a 10X client – you need to request this certificate from YOUR retirement fund administrator.

      Reply
  69. July 01, 2013 at 3:19 pm, Lindi said:

    Can you re-invest a living annuity?

    Hi
    I have a compulsory life annuity from my late husband. Could I take the money and invest it somewhere else?

    Reply
    • July 02, 2013 at 2:09 pm, 10X Investments said:

      Lindi,

      If this is a conventional guaranteed annuity, already paying you a monthly income, then you cannot change this. If it is a living annuity, where you have a say over how the money is invested and how much you draw down each year, then you can move the living annuity to another provider (although you cannot split it).

      Reply
  70. July 01, 2013 at 11:50 am, Roseline said:

    Retirement annuity pay-out due to ill-health

    I have a reitrement annuity to the value of R75 000 and they are delaying paying it out to me for various reasons:
    1. Divorce agreement – never been married, now fixed.
    2 Insolvency due to illness and being forced to take this route – apparently also fixed.
    3. Now they’re saying that because I receive an annual pension due to ill health (they have the documentation), I can only receive one third of my RA as the pension gets taken into account!!!!!!!
    1/3 is not good to me as I will only receive an approximate R200 monthly payment if I am lucky.

    Please help

    Reply
    • July 02, 2013 at 2:13 pm, 10X Investments said:

      Roseline,

      Early retirement due to ill-health is one of the few exceptions that allows RA holders to cash in their savings in full (net of withdrawal tax) before retirement. Otherwise, the RA holder must use two-thirds to purchase a pension at retirement/RA maturity date. But it is at the discretion of the RA trustees – subject to the available evidence and circumstances – to grant this exception. The exception provides financial relief to those who can no longer work due to ill-health, and who no longer receive an income. If you are already receiving an annual pension (suggesting you have already retired), then this exception would possibly not apply to you. If you do not agree with the trustees’ decision, you must follow the objection process provided by your RA administrator.

      Reply
  71. July 01, 2013 at 11:43 am, Wendy said:

    Only the holder of an RA may claim the RA deduction for tax

    How do you treat an RA in your child’s name – I pay the monthly premium and am the beneficiary – can I claim the tax deduction?

    Reply
    • July 02, 2013 at 2:06 pm, 10X Investments said:

      Wendy,

      Only the owner/holder of the RA may claim the RA deduction for tax. In this case, this would be your child. Note that it is the trustees who will determine the beneficiary of such a policy; once your child has financial dependents of its own, the savings would be allocated to those dependents.

      Reply
  72. June 29, 2013 at 4:06 pm, Nigel said:

    What does it mean when your retirement annuity is “paid-up”?

    Hello, I’ve just been informed by ReAssure, Romford UK that I have 2 retirement annuity policies for 6 and 7 000 GB Pounds respectively. The policy status is “paid-up”. Could you explain to me what this means (in layman’s terms). Thank you, Nigel Taylor.

    Reply
    • July 02, 2013 at 1:57 pm, 10X Investments said:

      Nigel,

      In the South African context (this is a SA web site), a paid-up retirement annuity policy refers to a situation where the policy holder has stopped making contributions. As an RA policy can only be cashed in from the age of 55 (other than for reasons of emigration or ill-health), it effectively lies dormant until then, although it continues to remain invested as before.

      Reply
  73. June 28, 2013 at 10:29 am, Sonnika said:

    What is the exempt portion of an annuity limited to?

    What will the exempt portion of an annuity in terms of S10A be limited to?

    Reply
    • July 02, 2013 at 1:12 pm, 10X Investments said:

      Sonnika,

      The exempt portion of an annuity (Y) in terms of S10A is limited to the capital portion of the annuity income, as determined by the formula Y= A/B x C. A equals the lump sum paid by the insured for the annuity, B is the total expected return of all annuities in terms of the contract and C is the amount of the (monthly, annual or total) annuity. So if you pay R1m of an annuity that pays out R1.5m in total, two-thirds of the annuity income will be tax-exempt.

      Note that S10A does not cover guaranteed annuities purchased pursuant of a mandatory pension or RA fund annuity purchase.

      Reply
  74. June 28, 2013 at 10:09 am, Anthony said:

    The gain in the RA value is included in the accrual

    When calculating a person’s estate for purposes of divorce settlement, where ANC with accrual contract is in place and the RA policy is not excluded from the contract, how will this affect the claim if the person having the RA is the bigger of the two accruals? Also if a single Premium RA is in question, can the RA be cashed in?

    Reply
    • July 02, 2013 at 1:04 pm, 10X Investments said:

      Anthony,

      The gain in the RA value is included in the accrual. You can request to split the RA, or you can settle the accrual (gain) by other means – this will be determined by the divorce order. If the divorce order splits the RA, the non-member spouse can choose a lump sum (which will be taxed per the withdrawal lump sum tax table), or they can transfer it to another RA tax-free.

      Reply
  75. June 27, 2013 at 5:59 pm, Subashiny said:

    Post-retirement investing

    She was 63 years old and planning on taking all the money out of her company retirement plan and investing it on bond mutual funds and money market funds. What advice would you give her?

    Reply
    • July 02, 2013 at 12:53 pm, 10X Investments said:

      Subashiny,

      We do not offer financial advice on this web site – to do so, we would have to do a full needs analysis; we merely guidance on sound investment principles and South African retirement law. Your question appears to come from the US, so we cannot address any legal issues around it.

      Post-retirement investing is a complex and high-risk affair. This person runs the risk of longevity, poor (or below-inflation) investment returns, market volatility and excessive draw-down rates – ie the risk that she will outlive her savings. Someone aged 63 will, on average, live another twenty years. These risks can only be avoided by buying a guaranteed annuity. But at current low interest rates, guaranteed annuities are expensive (ie pay out very little), so she would probably face an immediate drop in living standard.

      To address all these issues requires a proper financial plan that considers the amount saved, other sources of income, current living expenses and all the risk factors mentioned above.

      The principles of (retirement) investing are quite universal however: pay low investment fees, diversify broadly, and assume investment risk that is appropriate for your investment time horizon. US real (after-inflation) money market yields are practically zero at present – these will preserve her capital in nominal terms, but provide no growth. US bond yields are still very low, so these, too, provide little growth. But if interest rates rise, there is the risk of capital losses as well. Given her age, it would seem prudent to invest at least a portion in equities – perhaps through a broad, low cost index fund – to benefit from the real growth potential that equities have historically delivered.

      Reply
  76. June 26, 2013 at 9:26 pm, Vernon said:

    The maximum amount allowed for RA tax deductions

    Hi

    My company provides no benefits. If my salary is R16 000 monthly, does it mean that I can make an RA tax deduction of up to R2 400? Is anything more not tax deductable?

    Reply
    • July 02, 2013 at 1:18 pm, 10X Investments said:

      Vernon,

      You are correct – you can only deduct up to R2 400 in respect of your RA contributions. Anything more is carried forward and may be deducted in future years (subject to the prevailing limits in those years). If never deducted, these amounts are added to your tax-free lump sum at retirement (ie returned tax-free).

      If the proposed retirement reforms come into effect in 2015, you will then be able to deduct 27.5% of your taxable income (R4 400 pm at current income).

      Reply
  77. June 26, 2013 at 12:21 pm, Naume said:

    How to claim a death benefit

    Where do I start if I want to claim my late father’s pension from SA Railway?

    Reply
    • June 27, 2013 at 10:41 am, 10X Investments said:

      Naume,

      Assuming your father passed while still employed by SA Railways, you should contact the fund administrator of the SAR retirement fund (SAR HR department should know who this is), and find out what documents they require on order to process the benefit payment. Note that the Fund trustees will determine how the benefit is to paid out, and who will receive what share of the savings.

      Reply
  78. June 25, 2013 at 3:35 pm, Mashudu said:

    When can you withdraw your retirement annuity?

    Dear Madam/ Sir

    1. If I terminate or cancel my retirement annuity, do you pay it out to me? If so, what percentage?
    2. When can I withdraw retirement annuity?

    Reply
    • July 02, 2013 at 1:25 pm, 10X Investments said:

      Mashudu,

      You can only claim your RA from maturity date (earliest age 55). Unless the paid-up value is below R7 000 you cannot claim back the fund balance until you reach that age. If you stop contributing, your paid-up fund will stay invested.

      Reply
  79. June 25, 2013 at 1:33 pm, Denise said:

    Compulsory life annuity policies

    My mother had a Compulsory Life Annuity with Liberty. She recently passed away. What will happen to the balance of her life annuity? I am her sole heir.

    Reply
    • June 26, 2013 at 1:39 pm, 10X Investments said:

      Denise,

      Unless the compulsory life annuity policy included a survivor benefit (usually only for spouses), the policy will terminate and stop paying out. The commonly-used phrase is that the capital dies with the policy holder. This is in essence an insurance policy that pays for as long as the person taking out the policy survives. Only with a living annuity does any balance go to the nominated beneficiaries.

      Reply
  80. June 25, 2013 at 1:04 pm, Elizma said:

    Can an annuity be paid out before the maturity date?

    My husband had a 5 bypass and has been in hospital for over a month now. His annuity must be paid out next year. Seeing that he is unfit to work (self-employed), can the policy be paid out before the time and will there be a penalty?

    Reply
    • June 26, 2013 at 1:47 pm, 10X Investments said:

      Eliza,

      His RA can only be paid out before maturity date if he has to take early retirement due to his ill-health. This means he must be unable to return to work. The RA administrator will ask for medical proof and may seek to verify this.

      Reply
  81. June 25, 2013 at 12:30 pm, Shirley said:

    How to determine the tax on your retirement annuity

    I want to request my annuity to pay out. I will receive a lump sum amount of R113 751.46 and R1 690.24 monthly. What is the amount of tax that will be deducted? I am 56yrs old and do not owe SARS any money.

    Reply
    • June 26, 2013 at 1:55 pm, 10X Investments said:

      Shirley,

      The lump sum is taxed per the retirement lump sum tax table and the monthly income per the individual income tax table. Assuming you have not previously withdrawn from a retirement fund, and you receive no other income in retirement, you will not pay any tax on these amounts.

      Reply
  82. June 25, 2013 at 12:08 pm, Andre said:

    Tracking lost retirement annuity policies

    Good day. I had an annuity with Sanlam in 1976-77. I dropped it at about the same time. How can I go about finding out about it?
    ID: 5403025005084
    Thank you

    Reply
    • June 26, 2013 at 2:00 pm, 10X Investments said:

      Andre,

      Your best bet is to contact Sanlam and to ask them to do a policy search under your ID number. Some brokers also have access to a system called “Astute” which helps track “lost” policies.

      Reply
  83. June 22, 2013 at 9:10 am, Mrs Jann Hill said:

    Can you take out a retirement annuity at any age?

    I was born in 1955 – is it still possible for me to take out some kind of annuity, and what will the monthly contribution be, etc?

    Reply
    • June 25, 2013 at 10:33 am, 10X Investments said:

      Jann,

      Yes, you can take out a retirement annuity at any age above 16. You can choose the monthly contribution, but to see how much you should be saving depends on many factors, including your expected retirement age, your current income, how you plan to invest the money, and what fees you expect to pay. All these factors impact on your liability (the money you need to save to fund your retirement) and your asset (the money you will have saved towards your retirement). We invite you to visit the 10X Financial Education section and to use the 10X retirement calculator to find out more about this subject and to assist with your financial planning.

      Reply
  84. June 20, 2013 at 6:32 pm, Piofo said:

    How to claim your retirement annuity

    How do I access my retirement annuity?

    Reply
    • June 25, 2013 at 10:18 am, 10X Investments said:

      Piofo,

      You cannot access your RA until you turn 55. Once you have reached age 55 you must contact your RA administrator, to claim your benefit.

      Reply
  85. June 20, 2013 at 5:09 pm, Mark said:

    Exceptions to accessing your retirement annuity before retirement

    Is there any other way that I can have my retirement annuity pay out? I understand that legislation prevents a member from obtaining the funds before normal retirement age. I do have a pension fund to which myself and my employer contribute.

    Please could anyone assist me with this matter as I urgently need the money.

    Thanks
    Mark Areington

    Reply
    • June 25, 2013 at 10:22 am, 10X Investments said:

      Mark,

      You can only access your RA once you reach the age of 55. The only exceptions relate to formal emigration and early retirement due to ill-health. If you want to access your retirement savings early, you will have to tap your pension fund but that means resigning from your job.

      Reply
  86. June 13, 2013 at 3:08 pm, Natie said:

    Is there an age limitation to taking out a retirement annuity?

    What is the latest age I can join an RA fund for a tax benefit?

    Reply
    • June 13, 2013 at 4:54 pm, 10X Investments said:

      Natie,

      There no longer is an age restriction on joining a RA fund. Provided your intention is to save for retirement, you can do so at any age beyond 16.

      Reply
  87. June 12, 2013 at 12:49 pm, Maggy said:

    The s10C exemption for non-deductible contributions

    Which of the following statement/s pertaining to the s10C exemption for non-deductible contributions is/are true?
    a. The exemption applies only to an annuity acquired by a person after retirement and it is not available to subsequent holders of the annuity.
    b. Non-deductible contributions will be pooled and applied on a first-come-first-served basis, regardless of fund.
    c. The exemption is effective for receipts and accruals as from 1 March 2014.
    d. The exemption may be used against an annuity only. It is not available to use against a lump sum.

    Reply
    • June 13, 2013 at 2:12 pm, 10X Investments said:

      Maggie,

      The following answer comes courtesy of PwC:

      “A new s10C is inserted to exempt from income tax, contributions by a taxpayer to a “pension, provident or retirement annuity fund” that have not previously been allowed as a deduction either under the provisions of s11(k) or (n).
      The exemption operates by providing an exemption against a compulsory annuity that applies to pension funds, pension preservation funds and retirement annuities. It seeks to bring forward this roll over and make it inter-deductible between retirement products by consolidating it into a single balance. For example where a retirement annuity matures and the person still contributes to a provident fund, then on assessment the non-deductible provident fund contributions, will as an exemption, reduce the annuity income and will not be deferred till retirement/withdrawal where the reduction against the taxable amount which would normally operate in terms of the 2nd Sch. The exemptions applies in relation to the “persons own contributions” and thus does not roll over to any subsequent recipient of the annuity (i.e. spouse or dependants).

      Paras 5(1) and 6(1) 2nd Sch as well as s11(n) are also consequently amended to exclude from the pension withdrawal/retirement deduction, amounts or roll over deduction (retirement annuities) amounts that have already been exempted in terms of s10C.”

      In other words, the deduction will be available against annuity income (only), with effect from March 2014.

      Reply
  88. June 12, 2013 at 12:42 pm, Maggy said:

    How to calculate the tax on your retirement annuity

    Mrs A retires from a pension fund on 1 April 2014. During her period of membership she has contributed more than what she has been allowed to claim as a tax deduction. Her accumulated non-deductible contributions at the time of her retirement amounts to R60 000. Her accumulated retirement benefit at the time of her retirement is R1.5 million and she uses her full retirement benefit to purchase a compulsory annuity. Commencing from 1 May 2014, she receives an annuity of R10 000 per month.

    How much of the annuity is taxable for the year ending 28 February 2015?

    Reply
    • June 13, 2013 at 2:12 pm, 10X Investments said:

      Maggy,

      Mrs A will receive ten months of annuity income (May 2014 to Feb 2015), ie R100 000. Of this R40 000 will be taxable. The non-deducted contributions of R60 000 are not taxed.

      Please note that this site wishes to assist people with retirement fund and retirement planning related matters, and not students with their homework.

      Reply
  89. June 12, 2013 at 11:20 am, Shaun Ferreira said:

    The retirement annuity termination charge

    I have an RA with Liberty that I have been paying for the past 5 years which I would like to take out (for financial reasons). Will I lose a lot of money in this regard? I would like to change from Liberty because of various reasons and I think I should start a new one here…

    Reply
    • June 13, 2013 at 2:20 pm, 10X Investments said:

      Shaun,

      If your paid-up RA value is more than R7 000, then you will not be able to cash in your RA. You do however have the option to transfer to another service provider. Given that your RA is more than 5 years old, you stand to lose a maximum of 30% of your fund balance; however the amount of the termination charge reduces over time, so you should check your RA contract, which normally includes the termination charge scale per year of membership.

      If the information is not included, you can contact the service provider (Liberty) for this information. if you wish to transfer, Jenna at 10X Investments (jhartley@10x.co.za) can give you a cost-benefit analysis of transferring to a lower-cost RA provider, such as 10X (ie give you an estimate at what point 10X’s lower costs would offset the termination charge). 10X does not charge up-front fees or termination charges, so you would not be re-incurring these costs.

      Reply
  90. June 12, 2013 at 9:20 am, Anita Nel said:

    You can claim up to one-third as cash from your retirement annuity

    Can I request a lump sum pay-out of my RA if I want to invest this money?

    Reply
    • June 13, 2013 at 2:28 pm, 10X Investments said:

      Anita,

      If you are 55 or older, you can “retire” from your RA, and you can claim up to one-third as cash. You can deal with this money as you wish. But you must then use at least two-thirds of your RA to purchase an annuity. You cannot claim just a portion of your RA and leave the balance invested in the RA – it is all or nothing, and only from age 55 onward.

      Reply
  91. June 10, 2013 at 4:37 pm, Don said:

    The difference between a conventional annuity and a living annuity

    What’s the difference between a conventional annuity and a living annuity in respect of
    1) guarantees
    2) tax
    3) liquidity
    4) inflation

    Reply
    • June 11, 2013 at 10:47 am, 10X Investments said:

      Don,

      A conventional annuity offers a guaranteed income stream for life. Based on the terms of the annuity, this may include annual growth with inflation. An annuity that grows with inflation will pay out less initially than one that doesn’t. The annuity income is taxed per the individual income at tables. Liquidity is the issue of the life company, rather than the annuity recipient.

      A living annuity does not offer any guarantees. The holder assumes all the risks (longevity and investment risk). This includes also inflation and liquidity risk. The holder must ensure that the asset allocation ensures liquidity and above inflation growth. No tax is due within the living annuity, but the annuity income taxed the same way as the conventional annuity income.

      Reply
  92. June 09, 2013 at 5:49 pm, Jolanda said:

    I had an RA with Sanlam which was due to pay out when I turned 55, but Sanlam had put someone else’s particulars to my policy details and they phoned that person to pay the policy out to them. They still kept deducting the premium from my husband’s bank account. How often does this happen? To date I have had no response from Sanlam about the matter.

    Reply
    • June 11, 2013 at 10:49 am, 10X Investments said:

      Jolanda,

      This is the first time we have heard of such an incident. Who holds the policy contract? This must be submitted on claiming the benefit. If you hold the contract, then Sanlam cannot pay out the benefit to another person. You should follow Sanlam’s formal complaints process to get this matter resolved.

      Reply
  93. June 07, 2013 at 6:47 pm, Olabode said:

    How to start saving for retirement

    I just can’t think of what to do at retirement, even though am saving towards it. I am a nurse, any suggestions?

    Reply
    • June 10, 2013 at 12:46 pm, 10X Investments said:

      Olabode,

      Your question is a bit vague, and we are not sure whether it is of a philosophical or financial nature. Financially speaking, what you CAN do at retirement will depend largely on what you DID do before retirement, in terms of saving. You should strive to save 15% of your income for 40 working years, to give yourself a good chance of having saved enough that you can maintain your standard of living when you stop working. While working, you should invest this money according to your age and retirement date (in terms of your investment mix), diversify broadly and pay low fees; you should avoid unrewarded investment risks. We appreciate all this may sound a bit technical, so we invite you to visit the 10X Financial Education section, to learn more about this subject. If you have a specific question, please feel free to post again.

      Reply
  94. June 07, 2013 at 1:18 pm, Stela said:

    Is your living annuity taxed on the same basis as your income?

    How much site/PAYE can I expect to pay per month on my monthly income from a living annuity that I receive after retirement?

    Reply
    • June 07, 2013 at 11:16 pm, 10X Investments said:

      Stela,

      That will depend on the level of your income. Your living annuity is added to your taxable income, and is taxed on the same basis as your employment income, ie according the normal income tax table. The current annual tax threshold for under 65′s is R67 111 and for over 65′s R104 611. This means you only pay tax once your annual income exceeds these levels.

      Reply
  95. June 07, 2013 at 10:08 am, David said:

    I have two living annuities at the moment. Can I transfer the contents of one them into the other to make one living annuity and if so how do I do it?

    Reply
    • June 07, 2013 at 12:05 pm, 10X Investments said:

      David,

      Yes, you can transfer or join your living annuities, but you will not be allowed to split them again thereafter. The specific process (required documentation) will depend on your service providers, but essentially you will have to give notice to the one service provider, and instruct them where they should transfer the money, and you will have to alert the other service provider that you are transferring in another living annuity. The two providers will then communicate with each other, to effect the transfer smoothly.

      Reply
  96. June 07, 2013 at 9:26 am, Zakhona said:

    How to cancel your retirement annuity policy

    I seriously need to cancel the retirement annuity policy I have with Metropolitan, what should I do?

    Reply
    • June 07, 2013 at 12:03 pm, 10X Investments said:

      Zakhona,

      You can make your RA paid-up (ie stop contributing). You will most likely incur a termination penalty (an accelerated recovery of upfront costs incurred on your behalf by the service provider relating mainly to broker commission). If the paid-up value is less than R7 000, you can withdraw from the RA, otherwise you have to wait until you are at least 55, to claim your money. The exceptions to this rule require your serious ill-health or formal emigration. If you are merely unhappy with your service provider, you can transfer to another RA provider, but you will again, most likely, incur some early termination charges.

      Reply
  97. June 06, 2013 at 5:01 pm, G.C. Sutherland said:

    Your IRP5 Income Tax Certificate

    Please will you e-mail me my IRP Income Tax Certificate, Old Mutual Trust Managers Ltd.
    Cert. no: 78607401192012020000000005170
    PAYE ref. no: 7860740119

    My accountant has asked me to give him this info as soon as possible. Thank you for your help.

    Reply
    • June 07, 2013 at 11:23 am, 10X Investments said:

      Mr(s) Sutherland,

      You need to send your request to Old Mutual.

      Reply
  98. June 06, 2013 at 9:47 am, Stela said:

    Does the age of a retirement annuity affect its tax calculation?

    I have an old RA (1990) that I stopped contributing to in the 90′s. I started a new one with a second company in 2005. Are there any tax benefits applicable if I were to remove the funds from the new one and put it into the old one? Does the age of a policy play a part in tax calculation? (I am 53yo.)

    Reply
    • June 06, 2013 at 11:48 am, 10X Investments said:

      Stela,

      You would have to check with the service providers (on both sides) whether they would allow such a transfer. But there would be no additional tax benefits, although you may save on fees if you own one instead of two RAs. The age of the policy does not come into the tax calculation – all RAs are taxed per the current tax law. Be aware though that you may incur a “penalty” if you transfer your new RA to the old one. You would probably avoid this by doing the opposite – transferring the old paid-up RA to the new RA.

      Reply
  99. June 05, 2013 at 6:43 pm, Nathan said:

    Can you make an RA contribution this year & claim it against prior year income?

    How does one add a contribution to an RA, but mark it in respect to a previous tax year (i.e. to maximise tax efficiency for previous years)?

    Reply
    • June 06, 2013 at 11:40 am, 10X Investments said:

      Nathan,

      You cannot make a contribution this year, and claim it against prior year income. This is why top-up payments must reach the administrator by the end of February every year. You can only set off unclaimed contributions against future income (ie in future years) and only within the prescribed limits that year.

      Reply
  100. June 04, 2013 at 6:57 pm, Mark said:

    Are you paying too much tax on your retirement annuity?

    I reached 55 years of age and took my 1/3 limit of R270 384, but SARS has deducted R78 317 in tax. I waited an hour to get to the front of the queue and they told me that this is in fact the amount taxable. Can you quote me the precise chapter and verse on this from the Pension Funds Act to put in my written objection? Thank you.

    Reply
    • June 06, 2013 at 11:05 am, 10X Investments said:

      Mark,

      Retirement cash lump sums are taxed per the retirement lump sum tax table, which you will find on practically every financial web site and in every SA tax guide.

      If this was your first ever “withdrawal” or “retirement” from a retirement fund (including any pension or provident funds), then no tax would have been due as the first R315 000 of a retirement cash lump sum is paid out tax-free.

      However, if you previously withdrew from other funds, that will be considered, as SARS taxes your total cash lump sums in aggregate. So, amounts between R315 000 and R630 000 are taxed at 18%, the balance to R945 000 at 27% and the remainder above R945 000 at 36%.

      Working back from the information provided, to pay this amount of tax (R78 317 on R270 384), you would, for example, have had to retire from a provident fund before you cashed in your RA, and received a cash lump of R733 628. If you previously cashed in your company retirement fund on changing jobs (instead of preserving it) that will also be considered by SARS.

      If none of the above apply, then you indeed have cause for complaint. A simple reference to the retirement lump sum tax table in your appeal should suffice.

      Reply
  101. June 04, 2013 at 12:54 pm, Basil said:

    How your retirement annuities are taxed upon death

    When I die, how will my annuities be taxed in South Africa?

    Reply
    • June 04, 2013 at 3:36 pm, 10X Investments said:

      Basil,

      The term “annuity” is a bit vague, as this can refer to a retirement annuity (a pre-retirement product), or a conventional or living annuity (both post-retirement products).

      If you die while still a member of a retirement annuity fund, the beneficiaries (as determined by the Trustees) can individually choose to receive either a cash lump or to buy a living/conventional annuity. Any cash lumps paid out are taxed per the retirement cash lump sum tax table as though they had been received by you on the day prior to your passing. This means the first R315 000 will not not taxed, the second R315 000 at 18%, the third at 27%, and any balance above R945 000 at 36%.

      Amounts transferred to a conventional or living annuity are not taxed, but the subsequent annuity income is taxed in the hands of the recipients per the income tax tables.

      If you already hold a living annuity, the exact same principles apply (except that you now determine the beneficiaries).

      If you buy a conventional annuity, you pay income tax on the annuity income. The capital will then die with you (ie there are no further tax consequences), except if your annuity includes a spousal/survivor benefit (in which case the survivor will then be taxed on the remaining annuity income).

      Reply
  102. June 03, 2013 at 3:11 pm, Am said:

    Can you convert your entire retirement annuity into a cash lump sum?

    I have an RA that matures in Sept 2013 and currently years old. (Refer to the answer on 22 May in response to a question from Mike.)

    I am trying to confirm whether I can withdraw the estimated lump-sum proceeds of R200 000 or whether I only get one-third as a lump-sum?

    Reply
    • June 04, 2013 at 3:15 pm, 10X Investments said:

      Am,

      The short answer is “no”: on retirement from a RA, you cannot convert your entire RA into a cash lump sum, unless the paid-up value is less than R75 000. This prohibition is based on the definition of a retirement annuity in the Income Tax Act.

      Reply
  103. June 01, 2013 at 11:45 pm, Lance Grayson said:

    Retirement annuity tax deduction benefits

    My wife is a housewife, with no income and no RA. If I contribute on her behalf, what tax deduction benefits could either she or I claim currently?

    Reply
    • June 03, 2013 at 1:12 pm, 10X Investments said:

      Lance,

      An RA is a retirement fund for individuals. It confers tax advantages on the person doing the saving (tax-free contributions, investment returns and cash lump sum payments at retirement). But this is done with the understanding that the same person then pays tax on the retirement proceeds, beyond the tax-fee cash lump sum.
      In other words, you cannot claim the contribution to the RA, yet have the proceeds taxed in your wife’s hands one day. So if you contribute on your wife’s behalf, neither of you will have an immediate tax advantage.

      Your option is to open an RA in your own name, claim the deduction in your name (if you have not already maxed out your deductions), and then get taxed on the proceeds in your name. Alternatively, you can contribute in your wife’s name, but neither she nor you will receive a tax break on the contributions. The upside of this arrangement is that when the RA pays out a) the contributions not deducted for tax by her will be returned to her tax free (added to the tax free cash lump sum); the annuity income will probably be taxed at a lower average tax in retirement than if it was received by you (assuming you will have other retirement income); and c) the RA still accumulates tax-free investment income.

      You would have to model these tax scenarios, to see if this arrangement would make sense for you. Understand that the main tax benefit attached to retirement saving relates to the tax rate differential between the rate you claim your deduction at (your marginal tax rate while you are working) and the average tax rate you pay on the proceeds in retirement. So if you deduct at the highest marginal tax rate (40%) and you then claim the cash-free lump sum (R315 000, with the overall cash portion limited to one third of the fund proceeds), and the annual annuity income is below the R105 000 tax threshold (per current tax table), then you would effectively pay no tax on the RA. That would be the ideal.

      For savers who cannot claim a deduction, yet end up being taxed in retirement on the proceeds, the case is less compelling. You may be able to do better, from a tax perspective by investing without the retirement fund wrapper. You may also pay lower fees in the process. But you then need to have the necessary expertise as regards the appropriate asset allocation and diversification through-out the investment process. You will pay tax on dividend and interest income earned, but your capital gains will potentially be taxed at a lower rate. To the extent that future CGT rates are not guaranteed and may increase, there is some risk to this approach.

      You would avoid this CGT tax rate risk with a RA. Also, an RA does impose certain disciplines (regular contributions and restricted access) while certain RAs – such as the 10X RA – would ensure that you have the risk-appropriate asset mix through-out and adequate diversification, all at a low fee. So such an option may have some merit, even if you cannot claim the tax deduction up front.

      Reply
  104. May 30, 2013 at 2:12 pm, Gregory said:

    Early retirement annuity pay-out

    Hello.
    I have 2 retirement annuity’s with Old Mutual. The company that I am working for is being closed. I just wanted to know whether I can’t get the retirement money paid out to me. I am only 52 now.

    Reply
    • May 31, 2013 at 3:18 pm, 10X Investments said:

      Gregory,

      You will have to wait until you are 55, to access your RAs. An RA is an individual savings product and therefore not affected by the circumstances of your employment. At 55, or when you withdraw from the RA thereafter, you will be required to purchase an annuity with two-thirds of the proceeds. Given your young age (with a 28 years+ statistical life expectancy), it is unlikely that the annuity pay-out will sustain your current life style. You should endeavor to find new work, to keep saving and to delay your retirement until the proceeds will sustain your current life-style through-out your retirement.

      Reply
  105. May 30, 2013 at 1:50 pm, Denton said:

    Can I combine the proceeds of my pension fund and RA to buy one annuity?

    Eg., if one has a pension fund of R7 million and an RA of R3 million upon retirement, I am assuming that I can take R3.33 million as cash and can use the remaining two thirds of each to buy a single annuity for R6.66 million. Correct me if I am wrong. Thanks

    Reply
    • May 31, 2013 at 3:14 pm, 10X Investments said:

      Denton.

      Your thinking is correct, you can use the proceeds of two funds to purchase one annuity. Obviously, you would have to exit both funds at the same time, and alert the annuity provider accordingly.

      Reply
  106. May 29, 2013 at 5:09 pm, John Gibson said:

    Are contributions made to an existing living annuity treated as tax deductible retirement annuity contributions subject of course to the 15% maximum?
    In other words, I had an RA with which I bought a living annuity. Can I still make RA contributions to that living annuity?

    Reply
    • May 29, 2013 at 6:19 pm, 10X Investments said:

      John,

      It is not possible to “contribute” to a living annuity. A living annuity only accepts transfer from other living annuities, or from retirement funds. To keep saving, you would have to start another RA.

      Reply
  107. May 28, 2013 at 2:30 pm, Kaz said:

    Non-residents: how to claim your South African RA fund

    How to cash in my RA when living abroad – not yet formally emigrated?

    Reply
  108. May 27, 2013 at 3:35 pm, Yasmeen Johnson said:

    How an estate with no beneficiaries is divided

    What happens if a member passes on and no beneficiary has been chosen?

    Reply
    • May 29, 2013 at 6:06 pm, 10X Investments said:

      Yasmeen,

      The trustees will allocate the money to (all) the dependents, as they deem fair. They would do this even if beneficiaries were nominated, as they have an obligation to do so under the Pension Funds Act. If there are no dependents and no nominated beneficiaries, then the money falls into the estate, and is dealt with according to the will of the deceased.

      Reply
  109. May 22, 2013 at 4:14 pm, Mosidi Modise said:

    Understanding the retirement calculator

    Hi there,

    I am currently in the process of looking into investing in an RA. I am well aware of the retirement reforms that are looming and want to have accumulated some savings by the time the reforms take place. I am not sure how accurate the information of the retirement calculator is. The recommended savings account seems overwhelming as well. I would like to look into the prospects of getting some advice on how I could make the savings manageable to contribute towards. Your help will truly be appreciated.

    Reply
    • May 23, 2013 at 2:20 pm, 10X Investments said:

      Mosidi,

      The 10X retirement calculator is accurate. The projections are based on your real income, and on real returns only. If you had to see the numbers including inflation, you would be even more stupefied. Say you earn R10 000 a month (R120 000 pa). Your target is to accumulate roughly ten times your final salary (assuming you are a single male at age 65). Let’s also assume your salary does not grow in real terms over the 40 years, and there is zero inflation. So your savings goal at the end of 40 years would be roughly R1 200 000 (R10 000 x 12 x 10).

      If you now assume that your salary did grow by inflation, say 6% pa, which is where inflation is right now. Your annual salary in 40 years time would then be R1.3m (buying what R120 000 buys today), and you would have to have saved R13m by then, to retire in the life style you are accustomed to.

      Growth, inflation and compounding over many years produce astounding results! The Financial Education section on the 10X home page (www.10x.co.za) offers you valuable advice on how to save, and why you need to look out for. The retirement reforms are quite irrelevant in this regard, as they will only make saving easier.

      Reply
  110. May 22, 2013 at 11:44 am, Mike said:

    Can you withdraw your retirement annuity tax-free?

    I have a small RA policy of R200 000 that matures in August 2013. I also have a much larger policy with a different company. When my smaller policy matures, can I withdraw the full amount tax free without having to convert my other policy into a living or guaranteed annuity?

    Reply
    • May 23, 2013 at 10:44 am, 10X Investments said:

      Mike,

      That should be the theoretical conclusion, given that SARS looks at RA funds in aggregate when it comes to matters such as minimum annuitisation requirements (ie fund balances above R75 000). In real life, however, the annuitisation requirement applies to individual RAs, so you will not be able to claim the entire R200 000 as cash on an individual RA as cash, on the basis that you own other RAs that in total add up to more than R600 000 in value.

      Reply
  111. May 21, 2013 at 8:45 pm, May One said:

    Cases in which you do not pay tax on your retirement annuity contribution

    If I can contribute 7.5% of my salary to a retirement fund, will I still be taxed?

    Reply
    • May 23, 2013 at 10:39 am, 10X Investments said:

      May,

      If you are contributing to a pension fund it will not be taxed. If you are contributing to a provident fund, it will be taxed, unless it is structured as a salary sacrifice. If you are contributing to an RA fund, it will not be taxed if the deduction is less than 15% of your non-pensionable income.

      Reply
  112. May 20, 2013 at 9:44 am, Perry Curling-Hope said:

    Can an RA be ceded to another?

    Can one cede an RA to another person?

    Reply
    • May 21, 2013 at 10:57 am, 10X Investments said:

      Perry,

      No, this is not permitted in terms of S37 of the Pension Funds Act.

      Reply
  113. May 19, 2013 at 7:33 pm, Leon said:

    Can you take your whole pension to buy an RA at retirement?

    Why is the tax payable on pension funds so harsh? Do you think this percentage will come down in the near future? When I reach my retirement age I can buy an RA. How does this work and the tax involved that is payable? Can I take my whole pension amount to buy an RA?

    Reply
    • May 21, 2013 at 11:03 am, 10X Investments said:

      Leon,

      The tax payable may seem high, but this is not necessarily the case. It is possible to save a substantial amount of money in a pension fund, and still pay very little tax on the proceeds. This is possible because the first R315 000 of any cash lump is not taxed. Further, as the annuity income generated by the balance is taxed as income, this means that the first R104 000 of the annual annuity income (per the 2014 tax table) is also not taxed.

      Of course, once the fund size increases, so does the average tax rate applied. All cash lumps above R945 000 are taxed at 36%. However, in most cases, to have saved so much money and receive a cash lump sum of this size means that you also deducted contributions are the highest marginal tax rate (40%). So these savers still have a tax benefit in that they are paying tax at a lower rate on the proceeds than claimed their deduction at.

      It is true that for high-income earners, the tax benefit diminishes in relative terms (although they still benefit more in absolute terms). The state wants to ensure that the saving system is not abused, and that high earners cannot shield excessive income and savings from tax. But it is like this around the world. And no, we do not believe the tax on retirement savings will come down.

      You cannot convert your pension savings into an RA (this is another saving product) once you reach your normal retirement age. Nor can you transfer them to a preservation fund at that point. You only have the option to buy a conventional annuity or a living annuity, and you must do so with at least two-thirds of your proceeds. You are allowed to invest up to 100% of your pension fund proceeds to purchase such annuities.

      You will not pay tax on the savings used to purchase an annuity, but you will be taxed on the annuity income thereafter, per the prevailing income tax table for individuals.

      Reply
  114. May 18, 2013 at 12:25 pm, Sonja-Anne Cilliers said:

    Can you withdraw your entire RA during unemployment?

    I have been unemployed for 9 months. Can I withdraw all the money I contributed towards my RA over the years?

    Reply
    • May 21, 2013 at 11:11 am, 10X Investments said:

      Sonja-Anne,

      Unless your paid-up RA savings are below R7 000, you will only be able to access your savings once you reach the age of 55.

      Reply
  115. May 17, 2013 at 12:32 pm, Shirlock said:

    What you lose upon early retirement

    I am now 56 years old and deciding to take early retirement. I need to know what could I lose maybe?

    Reply
    • May 17, 2013 at 2:26 pm, 10X Investments said:

      Shirlock,

      When you take early retirement, you lose a) the contributions you would have made until normal retirement date and b) the return you would have earned on your savings until normal retirement date. You will have saved LESS money. The problem is that because your retirement will last longer, you should have MORE money saved. There is a good chance that by retiring early, you will outlive you savings, or, if you are a planning to buy an annuity, that your standard of living will fall more than imagined.

      Reply
  116. May 17, 2013 at 10:02 am, Jeanette said:

    How to complete your ITR12

    My employer deducts R400 every month from my salary for my RA with Liberty, so in total R4 800 is deducted for the year. When I received my IT3 from Liberty, the reflected amount contributed was only R2 637. Which one of the 2 amounts will I put on my ITR12, because the previous year I had to pay tax in due to the RA my consultant advised me to take. This year I just want to complete my document correctly.

    Reply
    • May 17, 2013 at 2:59 pm, 10X Investments said:

      Jeanette,

      SARS will only accept the certificate from the RA administrator, so you should base your tax return on that. But you should query the discrepancy. Most likely the deductions are in respect of risk cover, which you cannot claim (other than for a income continuation benefit).

      Reply
  117. May 16, 2013 at 7:58 am, Ryan said:

    National Treasury’s retirement reform proposals

    I understand that the tax benefit of contribution deductability is to be reviewed and/or curtailed by the Receiver. When will this be effective and what is being proposed?

    Reply
    • May 17, 2013 at 2:16 pm, 10X Investments said:

      Ryan,

      Following a series of technical discussion papers in 2012, National Treasury issued a fresh set of retirement reform proposals in the 2013 Budget. The overriding goal is to simplify the system, standardise the tax treatment, and preservation and annuitisation requirements across the different fund types, and to give fund members a default solution when they exit their fund.
      On the matter of taxation, Treasury proposes the following: all employees may deduct contributions up to 27.5% of gross remuneration or taxable income (whichever is the greater), irrespective of whether they belong to a pension, provident or RA fund.

      If the employer makes the contribution this will be neutralized by way of a fringe benefits tax charge. These proposals have been strengthened as Treasury initially planned to limit the rate to 22.5% for those under 45. Also, the deduction cap has been raised to R350 000 pa, a big increase on the R200 000 first proposed in 2012. The cap includes the cost of risk benefits.

      The new taxation rules will take effect on so-called “T-day”, which should happen around 1 March 2015 or later.

      Reply
  118. May 15, 2013 at 3:51 pm, Shereen R. said:

    How dividend income outside retirement funds are taxed

    How is the tax calculated on dividends from shares and the tax on selling part of shares? How am I to pay these taxes if my earnings are less than the threshold, i.e. under R250 000 from next tax year?

    Reply
    • May 17, 2013 at 2:06 pm, 10X Investments said:

      Shereen,

      This question is not really related to pension fund law and savings principles. Dividend income outside retirement funds is taxed at 15%. The tax is collected as a withholding tax, so you will simply receive the after-tax amount.

      On the sale of shares: if you held them for less than 3 years, profits are taxed as trading income (ie simply added to your taxable income). If you held them for more than three years, profits are taxed as a capital gain. The first R30 000 pa of your annual capital gain is exempt. Of the balance, one third is included in your taxable income.

      When you complete your online tax return, you must declare the profits you made on the sale of your shares. The system will then assess your tax liability, and if any money is owing, you can pay by electronic transfer – the SARS e-filing website will guide you on what to do.

      Reply
  119. May 15, 2013 at 2:37 pm, Pamela said:

    Can you deduct your employer’s contribution towards your RA in the current tax year?

    Can I deduct my employer’s contribution towards my RA in the current tax year?

    Reply
    • May 17, 2013 at 2:04 pm, 10X Investments said:

      Pamela,

      You can deduct contributions in the tax year (ending 28 Feb) they are made, up to 15% of your non-pensionable income. If your employer does not have a work place fund and contributes to your RA, the all your income should be non-pensionable. You can carry forward contributions in excess of 15%, and deduct these in future years (again, subject to the 15% limit that year) Contributions not deducted for tax by the time your retire are added to the tax-free portion of your cash lump sum.

      Reply
  120. May 14, 2013 at 9:22 pm, Jessica said:

    If your employer contributes to an RA on your behalf

    If an employer contributes to an employee’s retirement annuity fund, can the employee claim it as a deduction for tax purposes?

    Reply
    • May 15, 2013 at 12:44 pm, 10X Investments said:

      Jessica,

      If the employer contributes on your behalf, you should be levied fringe benefit tax on the contribution, but your are allowed to claim the deduction. This may sound like you are not getting a tax break but you are.

      Imagine you earned R10 000 and you join an RA fund. The employer decides to pay your RA contribution of R1 500. Before, your salary was R10 000 and you paid income tax on R10 000. Now your salary is effectively R11 500; you pay fringe benefits tax on the added R1 500, but you pay income tax on only R8 500.

      Reply
  121. May 14, 2013 at 9:29 am, Samantha said:

    Can a living annuity be transferred to a compulsory annuity?

    Hi There,
    Can a living annuity be transferred later on to a compulsary annuity?

    Thanks

    Reply
    • May 14, 2013 at 11:51 am, 10X Investments said:

      Samantha,

      Yes, it can, but you will not be allowed to split your annuity (ie invest only a portion into a compulsory annuity).

      Reply
  122. May 14, 2013 at 7:48 am, Five said:

    Retirement fund industry investment fees

    I see your quotes automatically generalise that the industry standard is 3%. Using this scenario is false. I have a UT RA and my mother-in-law has a UT Living Annuity. Both these annual TER are below your 1.03% annual costs.

    What would make your quotes a little more real is to disclose that the industry average you use INCLUDES all the adviser fees. 10X has NO adviser fees.

    ie Compare apples with apples.

    Reply
    • May 14, 2013 at 12:24 pm, 10X Investments said:

      Five,

      The term “industry standard” may be a bit misleading, as we are really referring to the industry average. In most of our literature, we say the average retail cost of an RA is around 3% pa. That is the cost paid by the investor, and it will include administration, investment management and brokerage. This number is based on the work done by actuary Rob Rusconi a few years back, in his seminal work on costs in the SA savings industry.

      We compare our fees to the industry average (including commissions) as we are looking at the high fee problem from the perspective of the investor, not the product provider. Understand that most of the RAs in this country were sold, not bought, and they were sold by brokers who were handsomely rewarded for their work, and most of those savings sit with the big life companies. With 10X, investors have the option to come direct, without the use of a broker. Most life-company RA providers still don’t allow for this.

      The average fee may have come down a bit in recent years, due the emergence of low-cost providers, but if you look at life company RAs (and we do lots of cost comparisons for existing RA holders), the numbers are still exorbitantly high. Of course, an average is just an average. Some fees will be below average, and some will be above. The fact that you have wisely chosen a low cost service provider does not invalidate the high average fee or our argument.

      Reply
  123. May 11, 2013 at 8:35 pm, Nonhlanhla said:

    Do living annuities form part a deceased member’s estate?

    Explain with reference to convectional annuities what a living annuity is and whether these living annuities form a deacesead estate.

    Reply
    • May 13, 2013 at 10:03 am, 10X Investments said:

      Nonhlanhla,

      A convectional annuity is an investment formerly promoted by the financial services industry, on the basis that by growing returns at 15% pa for 40 years, the investor would become phenomenally wealthy by the time they retired. At retirement, the investor would then realise that these claims were just hot air, and that the bulk of the return merely compensated for inflation and did not build real wealth. In fact, after deducting annual fees, most investors got back little more than their (inflation-adjusted) contributions.

      More seriously, you are probably referring to a conventional annuity. This annuity provides you with a specified monthly pension for the rest of your life. You must purchase this annuity from a life assurance company, which assumes the longevity risk (the risk that you live longer than expected) as well as the investment risk (earning sufficient return on your capital to pay your pension). The full pension is paid until you die. The drawback is that your capital dies with you, and no money passes onto your heirs.

      A living annuity is not really an annuity; rather it is an investment product that transfers the risk and responsibility of securing an adequate income for life onto your shoulders. In return, you have greater flexibility, more control over your financial affairs, and your heirs inherit whatever is left of your capital after your death (ie your capital does not die with you).

      In selecting living annuity rather than a guaranteed annuity, you decide how to invest your savings. You can switch as much as much as you want within the basket of investments offered by your product provider (the investments are typically unit trust or multi-manager funds). Every year you must draw a pension from your investment. This so-called draw-down must be at least 2.5% but no more than 17.5% of the annual value of the residual capital. Your draw-down rate can change from year-to-year.

      Your heirs inherit any residual value after your death; they can choose to receive a lump sum, an ongoing annuity or an accelerated annuity (paying out over five years). You nominate the beneficiaries, and the money does not fall into your estate.

      Living annuities are offered by banks, collective investment schemes (such as unit trust management companies), life assurance companies and registered pension funds, but are classified as life assurance policies. They are mainly sold through Lisps (linked-investment service providers). Lisps are essentially administrators who invest your money according to your instructions. They then track the performance of your investments. Lisps do not provide financial advice and you normally have to deal with them through a registered financial adviser.

      A living annuity is riskier than a guaranteed life annuity. A guaranteed life annuity will provide you with monthly income for the rest of your life. You have no such certainty with a living annuity as you assume the longevity risk (the risk that you last longer than your savings) as well as the investment risk (poor market returns).

      Reply
  124. May 10, 2013 at 10:18 am, Ayanesh Chakraborty said:

    Saving tax on the employer contribution part of a provident fund

    Hello, I am a salaried individual and I fall in the greater than 30% tax slab. Recently I have changed my job and my new employer is a small organization in India with less than 10 employees, therefor my salary does not have a PF component. Though I have already done investement to cover the 80C and 80D, is there anything additional that I can do or ask my employer to do to save tax on the employer contribution part of the PF, which will now be taxable? The employer contribution is also part of my CTC.

    Reply
    • May 13, 2013 at 5:18 pm, 10X Investments said:

      Ayanesh,

      We can regrettably only answer questions related to the South African pension fund environment; we are not familiar with Indian tax and savings law.

      Reply
  125. May 09, 2013 at 3:20 pm, Chris van Deventer said:

    RA tax contributions

    What would be most beneficial? My own company contributes an amount towards my RA or I give myself a raise and contribute that full amount towards my RA. My tax margin is close to 40%.

    Thanks.

    Reply
    • May 13, 2013 at 9:51 am, 10X Investments said:

      Chris,

      From your own perspective, the two scenarios are tax neutral. Say your earn R10 000 pm and the RA contribution will be R1 500 pm. If the company pays the contribution, you will pay fringe benefits tax on R1 500, and income tax on R8 500 (ie your effective taxable income stays R10 000). If the company give you a raise instead, your salary will be R11 500, but your taxable income, after the R1 500 RA contribution deduction, will still be R10 000.

      From your company’s perspective, it can deduct your salary increase of R1 500 for tax, but it cannot deduct the RA contribution as this is only allowed in the hand of the individual. So giving yourself a salary increase and contributing to the RA in your own name would be more tax efficient overall.

      Reply
  126. May 08, 2013 at 11:22 am, Rina Coetzer said:

    Why are multiple RAs grouped together as one on your statement?

    I have more than 2 RAs with Sanlam. The value of one is below R75 000 and the other are above. Why are both added together and can I have the one paid out without the restriction of only having to take one third as a cash lump sum? What allows Sanlam to throw everything together under one umbrella if it is seperate annuities?

    Reply
    • May 09, 2013 at 1:30 pm, 10X Investments said:

      Rina,

      Our retirement law applies the aggregation principle in a number of instances, otherwise it would be too easy to circumvent the Income Tax provisions. Someone wishing to avoid the annuitisation requirement could simply take out multiple RAs and then cash them all in, if they are all below R75 000 in value. The state gives savers a tax benefit, by allowing then to deduct RA contributions against non-pensionable income, and not taxing the investment income earned by the RA. The pay-back is that savers must use these savings responsibly, by buying a annuity that will provide then with a life-long income, so that they do not fall back on the state for financial support at a future date.

      Reply
  127. May 08, 2013 at 2:58 am, Vusumuzi Davidson said:

    How long does it take for accumulated funds in my RA to be transferred into my account?

    I have just recently withdrawn my retirement annuity, for my own reasons. My financial advisor said that it’s going to take 2 days for the funds to be transferred. 2 days have now elapsed and the funds have yet to be transferred. I now have to hound him and Liberty to get answers. May you please put me out of my misery by responding to my question via my email address.

    Reply
    • May 09, 2013 at 10:58 am, 10X Investments said:

      Vusumuzi,

      You do understand that you can only withdraw from your RA if the balance is less than R7 000? Otherwise, the money stays invested – even if you make the RA paid-up – and you can only access it when you turn 55. At that point, you can only access one-third as cash unless the RA balance is less than R75 000.

      Assuming your RA balance is less than R7 000, it normally takes more than two days for the administrator to pay out (more like two weeks), as all the documentation must be in place and the administrator must get a tax directive from SARS. Hopefully your tax affairs are in order, or this will hold up the process.

      Reply
  128. May 07, 2013 at 2:32 pm, Frank Mason said:

    Upon emigration, in which country is your RA taxed?

    My wife and I emigrated to the UK 11 years ago and recently withdrew funds from our RAs on the grounds of emigration. There seems to be an inconsistency between the way different companies deal with withdrawals for emigration from a tax point of view. My wife was, as far as I’m aware, not taxed in SA, declared the funds as income in the UK and was taxed on it here. I have been taxed in SA. As I understand things, one is only supposed to be taxed on income in one country and I as far as I’m aware that is the country in which you are a tax payer (i.e. the UK in our case). Can you shed light on this matter?

    Reply
    • May 09, 2013 at 1:52 pm, 10X Investments said:

      Frank,
      We do not have full clarity on this issue, and we believe that SARS is still seeking to establish hard and fast rules as well.
      Typically, emigrants’ RAs are taxed per our withdrawal lump sum tax table. This was conformed by a recent SARS tax directive. But one part of that directive gives us pause for thought – below is this extract:

      “Where the emigration has already occurred the following documents must be attached to the Form C and submitted to a SARS Branch for consideration:
      · The member’s certificate of residency obtained from the relevant Tax Authority of the country in which the member resides;
      · A copy of the tax clearance certificate in respect of emigrations issued by SARS, and
      · A letter from the authorised dealer (on a letterhead) stating the, account holder’s name, account number; and that the account is blocked; or
      · the authorised dealer (on a letterhead) has to confirm that there is no blocked fund account, that
      · the emigrant does not have to open a blocked fund account and the said authorised dealer will remit the cheque directly to the emigrant’s account overseas;
      · Where the taxpayer has reached the age of 55 years but has not yet reached the retirement age in terms of the policy contract a copy of the original policy contract, together with an extract from the rules of the fund pertaining to the definition of retirement date, retirement benefit and emigration withdrawal benefit must be submitted with the application form.

      NOTE: Only a certificate of residency issued by the Tax Authority of the country in which the member resides in accordance with the double taxation agreement (DTA) between SA and the country of residency will be accepted. If there is no DTA the member must still obtain a certificate of residency from the Tax Authority.”

      The “Note” portion suggests that DTA’s do matter. Such tax agreements normally provide that the income should be taxed at source. “Source” is quite an involved subject and depends on the individual circumstances. Normally, the source of a retirement income is where the money was invested and where the service underlying the fund contributions was rendered. However, if these services were not rendered in SA for more than 10 years, there may be a case that the source of the RA lies outside SA.

      We would suggest that you first establish which country has the more favourable tax regime. If it is the UK, then you should try and invoke the DTA with the UK, and see if that gets approved.

      Reply
  129. May 07, 2013 at 1:07 pm, Bongani Lawrence Cele said:

    What happens when you cancel your RA?

    In the event of finding it difficult to continue with the premium payment on my retirement annuity, can I cancel the policy, and what will happen?

    Reply
    • May 07, 2013 at 3:37 pm, 10X Investments said:

      Bongani,

      When you stop contributing, your policy becomes paid-up. Your administrator will typically levy a termination charge – if this is a recent policy, it will be limited to 15% of your balance. If the remaining balance is less than R7 000, you can withdraw from the RA. Otherwise, your money will stay invested until you are allowed to access it (typically only from the age of 55, unless you retire early due to ill-health, or your formally emigrate). Some policies allow you to take a contribution holiday, or to resume contributions once you can afford to do so. You can also transfer your paid-up RA to another provider, now or at a future date.

      Reply
  130. May 06, 2013 at 2:04 pm, Pranesh said:

    How your retirement annuity is taxed

    Hi,

    In your Retirement Annuity FAQs you state:
    “Investment returns are tax free – there is no tax or capital gains tax on the investment return earned in an RA.”

    What does this mean exactly?

    Reply
    • May 07, 2013 at 3:24 pm, 10X Investments said:

      Pranesh,

      As individuals, we pay on investment income. Interest – above the R22 800 threshold – is taxed as income. Dividends are taxed at 15% (by way of a withholding tax). Capital gains (33% thereof) are also taxed as income. Share trading profits (for shares held less than three years) are also taxed in full as income.

      In an RA, none of these taxes are levied (in addition to the tax deduction your may receive on your contribution. So your investment value compounds on the full capital growth and income earned every year.

      Instead, you are only taxed on the proceeds of the RA. For the one-third lump sum, the retirement tax table applies (the first R315,000 is paid out tax free, the second is only taxed at 18%), while the annuity portion is taxed as income. As your average (and marginal) tax rate in retirement tends to be lower, you end up paying less tax overall than if you saved on your own accord.

      Reply
  131. May 06, 2013 at 1:57 pm, Delorne said:

    Pension fund tax implications

    I have been working for 10 years and recently resigned. Do you think it will be a feasible to withdraw a lump sump and pay off my existing home bond?
    Will there be less tax implications if I just leave my provident fund with Sanlam until the maturity date? Please help.

    Reply
    • May 07, 2013 at 3:20 pm, 10X Investments said:

      Delorne,

      It is tempting to withdraw your retirement savings early, and pay off your mortgage.

      You can tackle this question from a number of angles.

      From an emotional and security perspective, it is comforting to pay off your mortgage, reduce your financial risk (ie being unable to make your monthly bond payment and possibly losing your house), know that you own your home, and free up your monthly cash flow. For this reason, most of us try to pay down our mortgage as quickly as possible. (There are of course the exceptions, who, given the opportunity to invest SURPLUS cash in their bond, or in the market, choose the market because they believe they will earn a better return there. That is tantamount to to borrowing to invest, which is a high-risk pursuit.)

      Your provident fund is NOT surplus cash. Still, from a financial perspective, you could compare the return you would earn on your pension savings to the return you would earn paying off your bond. The long-term gross (before fees) return on a high equity portfolio has been around 5% over the long-term. After fees, it tends to be quite a bit lower, probably in the 2% to 3% range, unless you use a low-fee provider like 10X. Compare this to the cost of your mortgage. Assuming you are paying prime (8.5%), with inflation at close to 6%, then your real cost saving (ie return) is also around 2-3%. So from that perspective, there is little difference at present. Of course, if (real) interest rates were to suddenly jump up, investment returns would fall sharply, and you would have been better off paying down your mortgage, at least in the short term. But thinking along such lines is a) speculative and b) short term thinking.

      From a tax perspective, it does make sense to preserve your savings until you retire. On withdrawal before retirement, only the first R22 500 of a cash lump sum is not taxed, but at retirement, the first R315 000 of any cash lump sum is not taxed.

      But let’s view this from another (and the proper) perspective. There is always a (finance) cost to accommodation. If you don’t own your property, the cost is your monthly rental. If you use debt to buy a place, it is the mortgage cost. If you use cash to buy a place, it is the investment return you forgo on the cash. We may believe we are living for free once we have paid off the bond, but we don’t.

      Accommodation – however you pay for it – is part of your monthly cost of living. As such, this cost should be matched against, and paid for out of your current monthly income. If you cannot afford the monthly bond repayments, you may be living above your means.

      Your retirement savings are there to provide you with income in retirement. If you pay down your mortgage now with your retirement savings, you are effectively sacrificing your future income to cover a present-day living expense. That is defensible ONLY if you then SAVE the monthly money that you previously used to pay down your mortgage (and even then, it will not be as tax efficient as saving through a retirement fund). But if you spend that extra money each month on living expenses, you are in reality living a life-style you cannot afford, and you will notice this soon enough, once your retirement savings run out.

      In the end this is a personal decision, depending on your personal circumstances. But if you do not preserve your savings until an appropriate retirement age (which is closer to 65 than 55), you will most likely outlive your savings.

      Reply
  132. May 04, 2013 at 7:05 am, Colin Maytom said:

    Medical aid pension fund schemes

    Recently we have had a pension fund change – we receive 2 pensions, one of which covers our medical aid contribution. The original rule states that this portion will receive an increase of 3%, more than the normal pension increase. This no longer applies – is this a contravention of the pension act or rules?

    Reply
    • May 07, 2013 at 10:46 am, 10X Investments said:

      Colin,

      This would be covered by the original employment contract, and the pension fund’s rules (which should reflect the substance of the employment contract). If the increases no longer comply with these agreements, you should certainly query this with your service provider/former employer. You should also re-visit the rulers, to make sure you have interpreted them correctly, and that there are no exception or escape clauses.

      It certainly does not come as a surprise that your fund would want to change this provision. Growing the medical aid pension 3% faster than your other pension (assuming this grows at, say, the inflation rate) is quite onerous, due to the compounding effect. For illustrative purposes, say both pensions paid R100 initially, with the one growing at 5% pa and the other at 8%. After 15 years, the one pension would have to pay out R208, the other R318 (over 50% more). It is not easy for the fund’s return to match this type of (real) benefit growth.

      Reply
  133. May 02, 2013 at 3:37 pm, Nicole said:

    The minimum for RA contributions

    Hi, what is the maximum lump sum amount I can invest in an RA and is this amount per annum? I see your minimum is R12 000, is this also per annum?

    Reply
    • May 03, 2013 at 12:23 pm, 10X Investments said:

      Nicole,

      The R12 000 limit refers to the minimum once-off capital investment, and is not an annual requirement. There is no maximum limit, although your tax deduction will of course be limited to 15% of your annual non-pensionable income (changing to 27.5% of taxable income once the new retirement laws come in, in 2015 or later). Any amounts not deducted for tax are carried forward, and may be deducted in future years, within the prescribed limits.

      For investors who want to contribute monthly, the monthly minimum contribution is R1 000.

      Reply
  134. May 02, 2013 at 11:47 am, Ian Bain said:

    When can you draw the full amount of your RA as a lump sum?

    I am retired – I have a retirement annuity policy which is due to be paid out on 1 June 2013, the value of which is R110 000. Can I draw this as a lump sum free of tax or are there tax consequences of doing this? Thank you

    Reply
    • May 03, 2013 at 11:56 am, 10X Investments said:

      Ian,

      You may only draw the full amount as a lump sum if the balance is below R75 000. So in your case you may only draw one-third as a cash lump sum, with the balance you must purchase an annuity. Assuming you have not previously withdrawn from any retirement funds, you will receive the one-third (roughly R36 000) cash lump sum tax free (the first R315 000 of the cash lump sum(s) paid on retirement is not taxed).

      The proposed retirement reforms plan to raise the minimum amount requiring annuitisation from R75 000 to R150 000. But this will probably only come into effect in 2015, or later. If you do not need the money urgently, you can delay retiring from your RA until then (although you should first check with your administrator that the minimum annuitisation amount will be determined by tax law, and not by your policy’s terms and conditions).

      Reply
  135. April 30, 2013 at 2:02 pm, Eunice Ngobeni said:

    RA withdrawal

    I need to find out if it is posible for me to withdraw money from my retirement annuity with Sanlam. I’m in Pretoria; where is the nearest Sanlam office?

    Reply
    • May 01, 2013 at 1:16 pm, 10X Investments said:

      Eunice,

      You cannot withdraw money from your RA unless your paid-up RA value (after you have stopped contributing) is less than R7 000. Otherwise you must wait until age 55 before your can retire from your RA. There are two exceptions to this, which relate to formal emigration and retiring early due to ill-health. The address of the Pretoria Sanlam office is shown below:

      Block A, Ground Floor,
      Lynwood Bridge Office Park,
      Cnr Lynnwood and Daventry Road,
      Lynwood Manor, 0081

      Postal address: Suite 135, Private Bag X025, Lynnwood Ridge, 0040

      Tel: (012) 470 0622
      Fax: 086 500 3124

      Reply
  136. April 30, 2013 at 11:15 am, Tristan said:

    Using your entire RA to pay off debt with SARS

    I need to pay SARS tax. Can I use my entire RA to pay them and not just the 1/3rd lump sum that I can get on retirement. If I can, how do I go about it? Thanks

    Reply
    • May 01, 2013 at 1:11 pm, 10X Investments said:

      Tristan,

      You can access your RA if a) you are over 55 b) your paid-up RA value is less R7 000, c) you are formally emigrating or d) you have retired early due to ill-health. In the latter two instances you can withdraw from the RA, and receive the full amount as cash (less withdrawal lump sum tax). In both instances, you need to prove your claim.

      If you are over 55, you may retire from your RA, but you will be required to use two-thirds to purchase an annuity – unless the RA value is below R75 000. So if your RA is worth less than R75 000 and your are over 55, you can cash in and use the full amount to settle your debt SARS. If the value is above R75 000, you would have to agree on an installment plan with SARS.

      Note that your administrator needs to get a tax directive from SARS before paying out a cash lump sum. If your tax affairs are not in order, this may hold up the process. So you may have to settle with SARS before you can get hold of your RA cash lump sum.

      Reply
  137. April 28, 2013 at 5:41 pm, Struan Goss said:

    Investment income and non-pensionable income

    Hello 10X,

    I’m busy doing research for my own and my parents’ retirement. There is something ambiguous in your FAQ’s on RAs with regards to the following two sentences. “Taxable investment income is always non-pensionable” and “Non-pensionable income is your taxable income excluding (if any) your pensionable income, retirement fund lump sum benefits, assessed losses and capital gains.” Maybe I do not understand the definition of investment income. I assume that investment income would include the income from dividends and capital gains on shares? I trade on the JSE – is the income I make through capital gains and dividends considered non-pensionable or not?

    What can I consider non-pensionable so as to benefit from the 15% tax reduction in RA contributions?

    Regards,
    Struan Goss

    Reply
    • May 01, 2013 at 1:05 pm, 10X Investments said:

      Struan,

      As a rule, any income you earn outside your work place will not form part of your pensionable income, and therefore becomes part of your non-pensionable income. Although non-pensionable income is the basis for your RA deduction, some amounts are specifically excluded by the Income Tax Act. One such exclusion is a capital gain, so you cannot claim a RA deduction against a capital gain.

      Since 2007, you only realise a capital gain on the sale of a share if you held the share for three years or more. If you held the share for less than three years, any profit is viewed not as a capital gain, but as trading income, and taxed as such. This means you can deduct RA contributions against your share trading income but not against your share capital gains. Dividends are taxed by way of a withholding tax and do not fall into your taxable income, so you cannot claim RA contributions against your dividend income.

      Investment income that does qualify for an RA deduction: interest income (only amounts above the annual R22 800 interest exemption), share trading income and rental income.

      Reply
  138. April 24, 2013 at 6:21 pm, Seelan said:

    You can only access your RA savings once you turn 55

    I am really in financial constraints and I need my RA. Can I withdraw it and cancel my policy?

    Reply
    • April 25, 2013 at 1:47 pm, 10X Investments said:

      Seelan,

      You can only access your RA savings once you turn 55, at which point you will have to purchase an annuity with two-thirds of the proceeds. There are some exceptions to this rule: you can withdraw earlier for reasons of ill-health (sufficient to prevent you form working), formal emigration, or if your fund balance is less than R7 000.

      You can make your RA paid-up now (stop contributing). If you own a life company RA, you will most likely incur a termination charge (which is really an accelerated recovery of upfront costs incurred by the RA provider).

      Reply
  139. April 22, 2013 at 4:47 pm, Sam Wessels said:

    Lump sum tax and monthly pension tax

    How will an amount of R774 400 as a lumpsum be taxed?
    A monthly pension of R17 400, how will that be taxed?

    Reply
    • April 23, 2013 at 10:08 am, 10X Investments said:

      Sam,

      Assuming you have not previously withdrawn or retired from a retirement fund, and you are now retiring, you will pay lump sum tax as follows: 0% on the first R315 000, 18% on the second R315 000 and 27% on the balance to R774 400. The total tax is R95 688, so you get out R678 712.

      Your monthly pension is taxed per the income tax tables. At R17 400 pm, you annual income is R208 800. Assuming you are now 60 (receiving a rebate of R12 080 pa), you will pay annual tax of R28 528 on this, which means you get out R15 022 per month. if you are 65 or older, you will get out an extra R562 pm, as your rebate increases to R18 830 pa.

      Reply
  140. April 19, 2013 at 1:38 pm, Sandra said:

    If your annuity remains invested, it should continue to grow

    I have just turned 54 and I have have a paid-up annuity with Sanlam for some years. It was made paid-up after I went through bad divorce and requested a new annuity with Sanlam.
    The paid-up annuity has had a value of about R13 thousand for some time now as I don’t know if it’s growing or not. I need the money as I am going through a difficult financial situation. May I apply to Sanlam or will they just ignore my request as I am not 55 years old yet?

    Reply
    • April 23, 2013 at 9:11 am, 10X Investments said:

      Sandra,

      Your annuity remains invested, so it should continue to grow. The growth rate will depend on how the annuity is invested, and how the underlying investments have performed in recent years, net of fees. As the RA value is more than R7 000, you cannot access the RA before you turn 55, so you will have to be a bit more patient.

      Reply
  141. April 19, 2013 at 9:31 am, Avi Saks said:

    Annuitisation requirements do NOT apply to formal emigrants

    I would like to know if the 1/3 cash limit and compulsory annuity applies to over 55 year-old emigrants as well, or can they take out the whole lump sum after the age of 55?

    Reply
    • April 23, 2013 at 9:20 am, 10X Investments said:

      Avi,

      The annuitisation requirements do NOT apply to formal emigrants, irrespective of their age. Someone who formally emigrated after the age of 55 can withdraw from the RA and receive the entire balance as cash, net of withdrawal lump sum tax. The proviso to this is that if you have already retired from your RA, and taken out the annuity, then you cannot undo this on emigration.

      Reply
  142. April 17, 2013 at 9:59 am, Michael Carroll said:

    The value of your RA today

    During the 80′s I made several RA’s “paid up” and was paid out nominal amounts. 2 of these were with companies I worked for, but not sure if these were also cancelled.
    Are any of these worth anything now?

    Reply
    • April 17, 2013 at 10:53 am, 10X Investments said:

      Michael,

      Assume you had R5 000 invested in a RA in 1983, and this money was invested in a balanced portfolio that earned a compound return (including inflation) of 15% pa (5% real, 10% inflation). This investment would then be worth around R330 000 today.

      Of course, RA fees would have to come off this return. Say your service providers charged a total annual fee of 3% pa, which is the average retail RA fee in this country. Your investment would then only be worth R150 000. And if you chose a more conservative asset mix (with lower equity exposure), your gross nominal return may only have been 12%, instead of 15%. After fees, your R5 000 would then only be worth about R66 000 today. As you can see, compounding returns over 30 years work magic on your investment but compounding costs and lower returns wreak havoc!

      Still, if these RA were not paid out in the Eighties, and you can locate them, it may definitely be worth your while.

      Reply
  143. April 15, 2013 at 10:13 pm, Carlo said:

    Could your RA have disappeared?

    Somehow the annuity policy I had seems to be no more and this must have happened a while ago. I do not recall cancelling any debit order – how could this have happened?

    Reply
    • April 16, 2013 at 9:58 am, 10X Investments said:

      Carlo,

      Although some RA providers may indeed have the characteristics of a black hole, especially when it comes to charging fees and transparency, annuity policies don’t just disappear. Even if you failed to keep up with your contributions, you should still have received correspondence on the matter, informing you that your policy has been made paid-up. We recommend that you dig out your policy document, read through the terms and conditions, and then follow up with the administrator.

      Reply
  144. April 15, 2013 at 10:49 am, Godfrey said:

    When can you take your entire RA as a lump sum?

    I’ve had an RA with Liberty for 10 years now and it expired on 1 Jan 2013. I need to know if I can take the whole RA, because I need to pay off my bond. Otherwise, if I take one third, can I invest the two thirds with a different company/bank in a different way so that I can get a good interest rate and pay off my bond?

    Reply
    • April 16, 2013 at 9:52 am, 10X Investments said:

      Godfrey,

      If your RA value is less than R75 000, you can take the entire amount as a cash lump sum, otherwise you must use at least two-thirds to purchase an annuity. You can purchase either a conventional annuity or a living annuity. With a conventional annuity a life company will pay you a regular income stream for the rest of your life. You will be quoted a price (and you should shop around for the best price) but beyond that you have no say over how much money you receive, or how it is invested.

      If you invest in a living annuity, you get to make the decisions, and you can, within limit, decide how your money is invested. You must draw down between 2.5% and 17.5% every year and you carry the risk of outliving your money, and of poor investment returns. So unless you have some investment experience, this may not the right option for you.

      Reply
  145. April 15, 2013 at 10:18 am, Wenzel Ruta said:

    Retirement reform

    im now 58 years old, my age for retaitment is from 55 to65.my qestion is govoroment plning sized all pepole many if resign after 2015 and pay on monthly basic like comunist state/what is wrong deside on my money is this truth send please more detalis abouth this scam.

    Reply
    • April 16, 2013 at 9:41 am, 10X Investments said:

      Wenzel,

      While we cannot really make out what you are saying or asking, let me assure you that the government is not planning to steal your money and pay you a minimum monthly pension in the manner of the old USSR. Government will introduce some reforms in the private sector that will eventually require all savers to purchase an annuity with at least two-thirds of their retirement fund. These rules may eventually also apply to the Government Pension Fund. However, those over the age of 55 by 2015 will be exempt from the new rules which will, in any event, only apply to new savings after 2015 (not to the so-called vested rights).

      Reply
  146. April 11, 2013 at 7:36 pm, Francois said:

    How to manage your RA yourself

    I have been reading most of your blog and have recently had one of my Sanlam RA’s paid up. I have had it since 2005 and the value is about K56 after the admin costs that Sanlam have deducted (about K10). Will this fund continue to grow and how do I go about managing the fund myself? Very weird that our SA government managed to access their own fund to build an e-toll system, but won’t allow the public of this country to do the same.

    Reply
    • April 12, 2013 at 2:24 pm, 10X Investments said:

      Francois,

      The reality is that governments make the law (sometimes to suit their own political agenda), and citizens are bound by that law. One of those laws is that RA savings may not be accessed before the age off 55. This ensures that the state’s tax incentives on RA contributions and the RA investment income are not “misspent” pre-retirement.

      Although you have made your RA paid-up, your money will remain invested according to your instructions (within the restrictions imposed by the law [Reg 28] and the fund rules). You probably have the option to transfer your RA to another service provider, or to select another portfolio (run by a different fund manager, or with a different asset allocation or investment style). But you will still not have any direct say in how your money is invested in terms of choosing the underlying assets.

      Reply
  147. April 11, 2013 at 12:41 pm, Sacha Leah C Colin / Mullenders said:

    Can a living annuity pension fund be split during divorce?

    Can a living annuity pension fund be split (as a clean breakage) by a Judge of the Supreme Court? My ex-husband has been retired for over a year now and the annuity pays out to him every month, but not to me. I got divorced last year (2012) 8 Nov and it was a decision which we both agreed to upfront. It was stated in our divorce contract that my ex’s ABSA Living Annuity Pension Fund would be split (50%) with me and this was agreed to by a Judge of the Supreme Court – thus it was granted.
    No children are involved in the divorce, therefore the word “maintenance” was not mentioned. I am currently unemployed and also very sick with kidney cancer, etc, so I do not have the funds available to hire a lawyer.
    Still, to date, ABSA (AIMS) does not want to pay me my share, as they say that you cannot split a living annuity in a divorce; even though the senior ABSA AIMS consultant went so far as to hand me a contract and say that I will receive the money and that it is not a problem. What if my ex-husband re-marries, what about my portion – as he does not have any other stable income to support me with.
    So I have not been paid at all. Is there any way that you can supply me with advice regarding my pay-out? Regards, Sacha-Leah Mullenders

    Reply
    • April 11, 2013 at 2:00 pm, 10X Investments said:

      Sacha Leah,

      While it is possible to split a pension fund benefit before the fund member retires, this is no longer possible once the member has retired and purchased a compulsory annuity (either a living or conventional annuity). Even a Supreme Court Judge cannot approve a divorce provision that is not permitted by our law. If the pension fund money had already been transferred to the living annuity prior to the divorce date, then this aspect should have been dealt with differently in the divorce settlement (for example, by way of your ex-husband making a monthly payment).

      A divorce can be a drawn-out affair. It appears from your question and your time line that your husband retired more than a year ago, but that your divorce only came into effect some five months ago. Yet you may have agreed to the key points of the divorce agreement before your husband retired (or purchased the annuity), including splitting the pension fund. If your husband then invested in the living annuity, and still signed the divorce agreement on the old terms, he was possibly acting in bad faith, and taking advantage of your lack of knowledge on this matter.

      You will unfortunately have to obtain legal advice, to see if you have any recourse in this matter against your husband, as the living annuity service provider is also bound by the law.

      Reply
  148. April 09, 2013 at 2:56 pm, Nonceba Bikitsha said:

    Where to get the income tax certificate for your RA policy

    I need to be supplied with the income tax certificate for my RA policy, no: 014442686.

    Reply
    • April 10, 2013 at 10:18 am, 10X Investments said:

      Nonceba,

      You need to ask the company that looks after your retirement annuity policy for this information.

      Reply
  149. April 09, 2013 at 11:26 am, Saddick Johaadien said:

    The difference between withdrawal and retirement lump sum tax consequences

    Our employee has been “boarded” by doctors at the age of 55. What happens to his expected monthly “pension”? Liberty Life has paid him a lump sum as a final settelement with no regular monthly income while he is retired. Can you help?
    Many thanks
    Saddick

    Reply
    • April 10, 2013 at 10:11 am, 10X Investments said:

      Saddick,

      It is not clear what you mean by “boarded”. Assuming you mean that he has been forced out of the company, he would then be entitled to withdraw from the company retirement fund. Depending on the fund rules (and given his age), he may also be entitled to retire at this stage (withdrawal and retirement have different lump sum tax consequences).

      With the defined contribution regime adopted by most companies, retirement fund members do not receive a guaranteed pension in retirement. Instead, they receive the benefit that has accumulated in their retirement fund until the day they retire or withdraw. The size of this benefit depends on the monthly contributions made, the length of time the money was invested, the investment return earned by the fund, and the costs deducted by service providers.

      Presently, when a fund member withdraws from a retirement fund, he or she is entitled to claim their benefit as cash, or to transfer the proceeds to a preservation fund or another employer’s retirement fund. The fund must follow the member’s instruction in this regard.

      At retirement, the member has the option to take the full amount as cash (if he belongs to a provident fund), and the obligation to use at least two-thirds to purchase an annuity (if he belongs to a pension fund). Again, the fund must follow the member’s instructions in this regard.

      Your colleague will not receive a monthly pension form his former employer. If he desires a guaranteed monthly pension, he should purchase an annuity from a life company with the proceeds of his retirement fund. Ideally, he should have done this on exiting the fund, in which case the fund credit would have passed to the life company without attracting any tax (the tax would be due on the annuity income only).

      As the fund has already paid out (with the relevant lump sum tax deducted), this option now appears closed. Your colleague can still purchase an annuity, which will only be partly taxed, but from an after-tax perspective (depending on the size of the pay-out), the monthly annuity is still likely to be lower.

      Reply
  150. April 08, 2013 at 3:26 pm, Ward said:

    Should an employer invest in an RA, provident or pension fund?

    As an Employer, we currently have no “pension” fund and want to provide some sort of retirement benefit to employees @ 15% of salary. However, this will be a Company / Employer contribution only (i.e. no employee contribution). If we provide this RA contibution (will have to be in each employees name), the tax effect is Nil (Fringe Benefit negated by allowable RAF deduction for employee). So their current net salary remains the same, which is a necessity. Is this the best option tax-wise vs pension/prov funds, and best Investment-wise?

    Reply
    • April 10, 2013 at 10:07 am, 10X Investments said:

      Ward,
      The contribution/tax scenario you sketch is practically (but not legally) correct. Only employees/individuals are allowed to deduct retirement annuity fund contributions. If the employer makes the contribution, then this attracts a fringe benefits tax. But in theory, the employees cannot claim a tax deduction, so their take-home pay would be reduced. In practice, though, the RA certificate for the full amount of the contributions will be issued in the name of the employee. The company can factor this in when applying the PAYE tables to the employee’s income (ie the company may deduct less tax) thus squaring up the the employee’s tax position.

      A Group RA is in essence little different from an individual RA – the contractual relationship is between the individual and the RA provider. Within a Group RA, the company merely facilitates the deduction and payment of the contribution.

      Whether the Group RA is a better option tax-wise, relative to a provident or pension fund will soon become moot, as National Treasury plans to standardize the tax treatment of all three types of retirement funds within the next two years or so. So individuals will receive the same level of deductions across all types of funds, and they will all have the same requirement at retirement (ie at least-two thirds must be converted into an annuity).

      Reply
  151. April 05, 2013 at 5:47 pm, Margaret Seka said:

    Surrender your RA or make it paid-up?

    I have paid R800.00 monthly towards a retirement annuity in the last six months. My financial circumstances have changed, so would it better for me to surrender it or make it paid up?

    Reply
    • April 08, 2013 at 9:59 am, 10X Investments said:

      Margaret,

      This depends on your personal need. If you can no longer afford the contributions, but you do not need the capital saved, you should consider making the RA paid-up. If you do need the capital, your should consider surrendering the RA. Note that you can only “cash in” you RA if the value is below R7 000. Given you have only contributed for six months, this may still be the case. If you delay for a period, the additional investment return may push you over the limit, and you may then not access your money until your reach 55. Also understand that you may incur an “early termination charge”, up to 15% of your fund credit, if you stop contributing to your RA.

      Reply
  152. April 05, 2013 at 12:54 pm, Nante Diedericks said:

    RA maturity date

    Is it compulsory to have an RA paid out on the date of maturity (say at 60 years of age), or can one decide to merely extend the maturity date? If the maturity date cannot be extended, can one then re-invest or transfer the annuity to another annuity in your portfolio?

    Reply
    • April 08, 2013 at 9:56 am, 10X Investments said:

      Nante,

      You do not need to cash in your RA at maturity date. This date merely indicates the end of your contractual obligation to pay contributions. You now have a number of options beyond retiring from your RA. You can continue to contribute (at the same or different rate) to the same RA (but taking care that your RA administrator no longer deducts broker commission from your contributions or savings). Or you can make your RA paid-up (ie cease making contributions but keep your investment in the RA until you need the money). Or you can transfer your fund credit to another RA or RA provider, who may have a more suitable investment strategy and/or fee structure. There is no maximum legal age at which you must stop contributing to an RA, or at which you have you withdraw your funds.

      Reply
  153. April 04, 2013 at 9:34 am, Maudy Fourie said:

    How to handle your RA if you are unemployed

    I am 51 years old and have an RA with Sanlam. I have since divorced and am unemployed. What are my options?

    Kind regards
    Maudy

    Reply
    • April 04, 2013 at 11:05 am, 10X Investments said:

      Maudy,

      Your best option is to find employment, and delay accessing your RA for as long as you can. In any event, you will not be able to access your RA until you turn 55; if you then do so, you must use two-thirds of your fund credit to purchase an annuity. Given your relatively young age (and subject to your RA’s value), the monthly annuity will probably not pay very much, and may be insufficient to support your current living standard.

      Reply
  154. April 03, 2013 at 9:58 am, Sam said:

    How to choose the best retirement vehicle for you

    Hi,
    I recently completed my studies and have now started working for a small company that does not contribute to a pension fund. I would like to start saving for my retirement ASAP (I’m 22) and would like to know what the best retirement vehicle is to do so. I’m a bit weary of an RA because of their slow growth, so I’m afraid that it won’t suffice during me retired years. What other options are available to me?

    Reply
    • April 03, 2013 at 11:00 am, 10X Investments said:

      Sam,

      If your current employer does not offer a retirement (pension or provident fund), you have the option to save formally, through a RA (a retirement fund for individuals), or informally, by investing money personally (in unit trusts, money market accounts, offshore funds, or buying shares directly through a stock broker).

      The RA is a legal (retirement fund) wrapper that offers you tax benefits – tax free contributions, tax free investment returns and tax-free lump sums at retirement. These tax breaks are important and add to your retirement income. It is a disciplined, mechanical way to save, restricting access to your savings until age 55 at least.

      RAs per se don’t grow slowly. The factors that drive the return are the asset allocation, fees and the asset manager’s performance. They are the same factors that drive the return in a unit trust or other retirement fund.

      Too little equity exposure can depress your return, so you should consider an age-appropriate asset allocation (as a young investor you can afford high investment risk). Some asset managers perform well (deliver above average returns after fees), but over time most deliver below-average returns after fees. We have no idea who will do well, so you should consider an indexing strategy that simply secures you the market (average) return – you will do better than the average investor.

      The impact of fees is dramatic, as they reduce the real (after-inflation) return, which is generally only around 5% of a balanced portfolio. RAs do have a bad reputation for high fees and termination penalties (if you lower your contribution rate or make the RA paid up). But there are low cost unit-trust type RAs that do not have these issues.

      The 10X RA offers automatic life stage (age-appropriate) investing, indexing and low fees; and there are no termination penalties if you chose to transfer, change your contribution or make your RA paid-up (say when you join an employer-sponsored fund).

      Reply
  155. March 27, 2013 at 6:44 pm, Basheer said:

    Is your provident fund worth reviving?

    My provident fund policy is difficult to maintain with unstable cashflow in the private sector that I am in.
    It has been cancelled and revived once and now cancelled for the second time. Is it worth reviving? What is the benefit at 60 as I am now 55? To me the real benefit is in the sickness benefit which I enjoyed once for 3 months. I’d like to know about the end of the line at, say 60, if I try to keep the fund alive until than. The breakdown shows a life component of just over ZAR3m.

    Reply
    • April 03, 2013 at 9:22 am, 10X Investments said:

      Basheer,

      To answer this question, we would have to do a personal needs analysis, which we cannot do in this forum.

      Reply
  156. March 27, 2013 at 2:03 pm, Gerald Brown said:

    How much should you save?

    How must do I have to save every month until the age 60 in order to receive a payment of R10 000 per month until I pass on? And if my wife lives, the payment is to be passed on to her. I am 52 years old and employeed.

    Reply
    • April 03, 2013 at 9:09 am, 10X Investments said:

      Gerald,

      Today, an annuity at age 60 paying roughly R10 000 per month, growing with inflation and providing a spousal benefit would cost you about R2.7m.

      How much you need to save depends on how much you have saved already, your investment return and what fees you pay. Assuming you have not stared saving, using a balanced (high equity) portfolio, paying annual fees less than 1%, and earning an average (5%) real return over the next eight years, you would need to save around R23 000 per month. Of course, the investment return is not guaranteed and can be lower or higher.

      Reply
  157. March 26, 2013 at 11:04 am, Piet said:

    Can you seize contribution to your RA fund?

    I took out an RA after accepting an employment opportunity 2 years ago, as the company did not offer retirement provision as part of their cost to company offer. I took out the RA in order to provide for retirement myself. I have just accepted another employment offer where the company has a providend fund. This providend fund is compulsory. My RA is worth R60K at present. Can I withdraw this money and get it paid out to me? What is the best option for me to follow as I can’t afford to contribute to both on a monthly basis.

    Reply
    • March 26, 2013 at 12:19 pm, 10X Investments said:

      Piet,

      Unfortunately, we can’t give you any good news. You cannot “withdraw” from RA ever (unless you formally emigrate, or retire due to ill-health). You can “retire” from the RA, but only from the age of 55 onward. But that’s not all.

      Firstly, if you own a life company RA, and you stop contributing (ie you make the RA paid up), you will be hit with a termination “penalty”. In essence, this is an accelerated recovery of upfront costs incurred by the life company. The good news here is that this should be limited to 15% of your capital, seeing you took out the RA two years ago (in the past, you may have lost almost your entire capital). If you did not take a policy-based RA, but rather a unit trust-type RA (as offered by some asset managers, and by 10X), you would not incur a termination penalty, and you could make your RA paid-up, or simply suspend contributions, until your circumstances change.

      Secondly, if you decide to keep contributing to the RA, you will lose the tax deduction as you are joining a provident fund. The deduction in respect of your RA is allowed only against non-pensionable income (pensionable income is the income used by your employer to calculate contributions to the provident fund). The good news here is that the retirement reform (likely to be introduced in 2015), will allow you to deduct contributions to all types of retirement funds up to 27.5% of the larger of your gross remuneration or taxable income. So you would then be allowed to deduct your RA contribution again. Also, your non-deductible RA contributions in 2013/2014 could be carried forward, and you could deduct them in 2015, within the prescribed annual limits.

      As to your best option, the reality is that you don’t have any: you are compelled by law to join your new employer’s provident fund, and you will, by law, be prevented from withdrawing from your RA, or claiming further contributions against the pensionable income you will now earn (for now, at least).

      But it is important to understand that the termination penalty is just an accelerated recovery of upfront costs, and these costs would have been deducted anyway (and probably more) over the life-time of your policy. If you pay lower annual fees in the provident fund (as you should do, seeing it is a group scheme), you will soon make good the 15% you may lose on your RA savings.

      In this context, if you do incur a termination penalty, you should investigate whether the fees on your RA (you will still pay annual fees) are not too high (paying away more than 1.5% in annual fees is too high!) and you could make use of this opportunity to transfer your RA to a low-cost provider.

      Reply
  158. March 25, 2013 at 4:26 am, CB said:

    What to do when your RA balance shows as a credit

    I retired mid-year at age 60. I have an annuity pension through my union – accumulated over a 30+ year career. I have been receiving monthly installments from my union. When inputting my 1099R information, my surplus of $5k (amount TurboTax indicated as a refund) went to a shortfall (of amount due of $4.7k). How can that be? I received less than $35k from that fund.

    Reply
    • March 26, 2013 at 9:58 am, 10X Investments said:

      CB,

      We are a South African retirement fund administrator and investment manager. The form (1099R) and currency references suggest that you are a United States tax payer, so this question is not within our area of expertise.

      But if you have input the same information in both instances, it suggests that you either a) misinterpreted the output from the one source (you saw the “amount due” as a refund, or the other way around – which is suggested by the fact that one is a $5k credit and the other almost a $5k debit), or b) that you input some data incorrectly. But a US-based tax adviser would likely be more helpful in clearing up this matter.

      Reply
  159. March 23, 2013 at 1:39 am, Barrie Duckworth said:

    How to claim your RA contributions as tax deductible

    Hi

    I am currently based and pay tax in the UK, making monthly contributions to my PPS RA in South Africa.

    From what I understand, I am able to claim the contributions as tax deductible here in the UK under the Double Tax Agreement (DTA) between the two countries. One of the things I require to make the claim is a SF74 reference number given to a pension scheme by Pension Scheme Services (PSS) here in the UK. Having this number means that a scheme corresponds to a UK tax-recognised scheme. Is this something you can provide me with?

    Even if you don’t have this number I’d appreciate any other advice you might have.

    Thanks

    Reply
    • March 26, 2013 at 9:38 am, 10X Investments said:

      Barrie,

      As South African pension fund managers and administrators, this is obviously not our area of expertise. But per the relevant UK website, PPS (in SA) must apply to PSS (in the UK) for QOPS status. This would make it an approved scheme manager. See the extract below (www.hmrc.gov.uk/manuals/rpsmmanual/rpsm00501200.htm):

      “Scheme managers can apply for QOPS status by sending a form APSS 250 to PSS. If PSS accepts that the scheme is a QOPS it notifies the scheme manager and gives the scheme a QOPS reference number. The scheme manager is the person or persons administering, or responsible for the management of, the pension scheme. If the scheme manager is an individual then that individual must sign the form. If the scheme is managed by more than one individual then at least one of those individuals must sign the form. If the scheme is managed by a company then the company secretary or another authorised signatory or representative of the company must sign the form.”

      You must then contact PPS (in SA), to obtain their SF74 reference number, which they would have received from PSS (in the UK). See below.

      To obtain Double-Taxation Agreement relief, “the scheme must be tax-recognised in the other country, and have been accepted by PSS as corresponding to a UK pension scheme for the purposes of the DTA before an individual claims relief on their contributions to it. Generally speaking, the scheme will need to have been given a SF74 reference by PSS or a letter will need to have been issued by PSS accepting it as corresponding under the treaty.”

      In other words, you need to contact PPS in SA, to establish their SF74 number (if they have one).

      Reply
  160. March 19, 2013 at 1:18 am, Justin said:

    Is there a maximum age for taking out an RA?

    My mother is 88. I understand that there are no legal obstacles to her investing in a new RA, but are there practical difficulties? (Ex. 10X’s quote form only goes up to 80.) Later, will it be easy to get a quote for an annuity for a 95-year old?

    Reply
    • March 19, 2013 at 4:12 pm, 10X Investments said:

      Justin,

      The law does not set down a maximum age that you can sign up for a RA. Realistically, however, someone aged 88, is well past the age of saving for retirement. SARS may thus question the motive for taking out the RA 88 (and why we have, for practical reasons, cut off at 80)

      The primary purpose of an RA is to save for retirement, but the RA wrapper confers other benefits. Contributions may be deducted against non-pensionable income, amounts in the RA are protected from creditor claims, and any RA death benefit only falls into the deceased’s estate if there are no financial dependents and the deceased did not fill in a beneficiary nomination form (which may result in an estate duty saving).

      Tax avoidance is legal, but a transaction (such as a large lump sum investment into an RA at a very advanced age) can be challenged if its primary and only purpose is to avoid paying tax. Although we are not aware of instances where SARS has challenged the tax payer’s RA on the basis of their age, it is possible.

      Of course, if your grandmother receives still some form of income (eg pension or rental income), then she is well within her right to reduce her tax bill and put money aside for the future. SARS would not challenge this. She should have no trouble getting a quote on an annuity, even at age 95. If you are contemplating a 10X RA, you can simply insert the actual age or expected retirement age on the form.

      Reply
  161. March 18, 2013 at 7:42 pm, Andrew Mitchell said:

    3 Things to do now to increase your savings pot at retirement

    Hi, I am 46 and have an annuity with Clerical Medical that was given to me 15 years ago following my ex employers collapse. Their pension scheme was final salary and the fund was vastly over-funded so the annuity pays £7 620 per year when I reach 65 with a guarantee period of 5 years. I believe this is quite good so have done nothing with it but am now considering whether I could improve this, and how?

    Reply
    • March 19, 2013 at 4:08 pm, 10X Investments said:

      Andrew,

      We can realistically only answer questions relating to the South African pension environment. Some principles are international however. If you will receive a fixed annuity of GBP7,620 at age 65, this may sound good now, but the purchasing power of this will be gradually eroded by inflation over the next twenty years. At an inflation rate of 2% pa, this annuity will likely only buy you half as much as it does now. If this is a fixed annuity, the purchasing power of your annuity income will decline further during your retirement

      As a rule, there are three things to do now to increase your savings pot at retirement: save more, pay lower fees (choosing a low cost service provider) and earn a higher investment return (by changing your asset allocation and increasing your exposure to higher risk assets). We don’t know whether any of this is possible with your current annuity; if not, you should consider supplementing your savings through other (tax-advantaged) means.

      Reply
  162. March 18, 2013 at 9:37 am, Naresh Gunase said:

    Is RA deduction allowed against non-pensionable taxable income?

    Can one claim the tax benefit of contributing to an RA whilst receiving a pension income?

    Reply
    • March 20, 2013 at 9:49 am, 10X Investments said:

      Naresh,

      Yes, the RA deduction is allowed against non-pensionable taxable income. Such income sources would include interest income (only beyond the interest exemption), rental income and also pension income. However, lump sum receipts from a retirement fund are specifically excluded.

      Reply
  163. March 12, 2013 at 12:31 pm, S.GOVAN said:

    Maximum returns on your RA

    What will give you maximum returns if you are thinking of maturing your RA?

    Reply
    • March 13, 2013 at 9:39 am, 10X Investments said:

      S. Govan,

      You will probably maximise your return by buying lottery tickets with your RA proceeds. The return will depend on the pay-out that week. Unfortunately, the risk is high that you will lose all your money and earn nothing.

      That may sound cavalier, but it underlines two important points: a) the return has to be seen in the context of the attached risk and b) future returns are not guaranteed. The higher the expected return, the higher the risk that you will not earn that return. The lower the expected return, the more certain you can be of receiving that return.

      You therefore need to consider the risk you are willing to assume, also in the context of your investment time horizon. Traditionally, the asset class with the highest expected return is equities. Over the long-term, shares have delivered a real (after-inflation) return of around 7% pa. But the annual return is very variable. Since 1900, the share market has both halved and doubled over a one-year period. If your time horizon is long, you can afford to ride out this volatility, with the reasonable expectation (but no guarantee) that this asset class will deliver the highest return.

      If you need the money by year end, you cannot afford to take this risk, and you should look for a low-risk (cash-based) asset that will pay you the highest interest rate. But again, appreciate that the higher the promised interest rate, the more risk you assume (ie you may have to lock up your funds for a certain period or the lender has to offer a higher rate because a liquidity squeeze that may get worse).

      The daily financial press (eg Business Day) will give you a sense of the interest rate paid on various money market and savings products in the market.

      Reply
  164. March 11, 2013 at 3:50 pm, Lindi said:

    The transfer of annuities to a provident fund

    Can you transfer annuities to a provident fund?

    Reply
    • March 12, 2013 at 10:31 am, 10X Investments said:

      Lindi,

      It is not possible, at this stage, to transfer a retirement annuity to a provident fund. The RA is more restrictive than a provident fund as you may only access the money at age 55, and you must use two-thirds to buy an annuity. SARS will not allow you to circumvent these rules by moving to a provident fund, which allows you to withdraw on leaving your employer, and does not force you to buy an annuity.

      Reply
  165. March 08, 2013 at 2:18 pm, Videsh said:

    How is your benefit taxed?

    I am contributing 9.25% of my salary to a provident fund and my employer is contributing 18%, therefore a total of 27.25%. When I resign from the provident fund, how will my benefit be taxed? Is there a specific table? I am also contributing to a retirement fund – what will the tax implications be of both these benefits in my hands?
    Thank You

    Reply
    • March 12, 2013 at 10:19 am, 10X Investments said:

      Videsh,

      If you resign from your provident fund and claim you savings as a cash lump sum, your benefit will be taxed according to the withdrawal lump sum tax table. This dictates that the first R22 500 is not taxed, the balance to R600 000 is taxed at 18%, the balance to R900 000 at 27% and all amounts above R900 000 at 36%. If you are retiring, the retirement lump sum tax table will apply (the first R315 000 is then not taxed, the second at 18%, the third at 27% and the balance above R945 000 at 36%).

      Only your employer can deduct contributions to a provident fund. This also means that your contributions will be returned to you tax-free (added to the tax-free portion).

      You can only retire from your RA from the age of 55 onward. You may only take one-third as cash, you must use two-thirds to buy an annuity. The annuity income is taxed per the personal income tax tables. The lump sum is taxed per the retirement fund tax table, but the aggregation principle applies, ie the lump sum is seen in the context of (added to) any previous retirement lump sums you have received, and taxed accordingly. To the extent that you were not able to claim your RA contributions for tax, these will also be returned to you tax free.

      Reply
  166. March 07, 2013 at 9:53 pm, Nomusa Ntombela said:

    Where can you get a copy of your RA?

    I need a copy of my retirement annuity.

    Reply
    • March 12, 2013 at 10:16 am, 10X Investments said:

      Nomusa,

      Please contact the administrator of your retirement annuity directly.

      Reply
  167. March 07, 2013 at 2:32 pm, Lawson said:

    Can you cede a retirement policy?

    Can I seed a retirement policy and withdraw the money therein?

    Reply
    • March 12, 2013 at 10:22 am, 10X Investments said:

      Lawson,

      In terms of the Pension Funds Act – S19(5) – you are not permitted to cede or pledge your retirement fund. You can only access your RA savings from the age of 55, by retiring from the RA. The only exceptions to this rule require you to either retire early due to ill-health or formally emigrating.

      Reply
  168. March 07, 2013 at 2:02 pm, Shireen Ramawthar said:

    When can you claim your RA as a lump sum?

    I received 1/3 of my RA in 2008 (R50 000) and purchased another RA with part of my monthly income. My new RA is worth R40 000 and I need cash. Can I take this as a lump sum?
    Thanks

    Reply
    • March 12, 2013 at 10:12 am, 10X Investments said:

      Shireen,

      SARS usually works on an aggregation principle when it comes to retirement savings, ie it views your retirement affairs in totality, not as separate segments. Otherwise, it would become to easy to structure affairs in such a way that they circumvent the provisions of the Tax Act. The aggregation principle considers your retirement affairs from the perspective of things happening concurrently (side by side) as well as sequentially (ie one after the other).
      The latter, in particular, is applied on the taxation of lump sum benefits.

      When it comes to RAs, SARS will look at the total value of your RAs at the time you choose to retire from your RA. This means that if you have two RAs running concurrently, both under R75 000 in value, the Receiver will not allow you to claim either as a full lump sum, as the total value of your RAs is above R75 000. However, in your case, your RA’s run sequentially, ie one after the other. SARS can then only consider your one (present) RA, and will accordingly allow you to claim the R40 000 as a cash lump sum.

      Reply
  169. March 06, 2013 at 9:33 am, Sherida said:

    Where to find information on the Income Tax Act

    Where on the Internet can I find information on the ruling about: if your RA is worth R75 000 and under, you can be paid out the whole amount and not just a third.

    Reply
    • March 06, 2013 at 2:01 pm, 10X Investments said:

      Sherida,

      This is governed by the Income Tax Act. S1 of the Income Tax Act defines pension fund, pension preservation fund, provident fund, provident preservation fund and retirement annuity fund. The definitions of pension, pension preservation and retirement annuity fund provide that these funds can pay out their full value as a lump sum where two-thirds of their total value does not exceed R50 000, or where the member is deceased. The best place to find information on tax rulings is likely to be the SARS website…

      Reply
  170. March 05, 2013 at 10:49 am, Jenny said:

    Lump sum RA deposits

    A staff member has made a lump sum deposit into an RA. She requested that the payment be taken into account when her monthly salary is calculated. How can I assist her?

    Reply
    • March 05, 2013 at 4:21 pm, 10X Investments said:

      Jenny,

      The employee should provide you with formal proof of the lump sum deposit (eg a certificate from the RA administrator). You can then adjust the tax accordingly.

      Some caveats: If the lump sum deposit was made in February 2013, you cannot deduct it from income for the 2013/2014 tax year. Your employee must then wait for a refund from SARS. Further, the deduction is limited to 15% of non-pensionable income. If your company does not offer a retirement fund, then all the income your employee earns will be non-pensionable and you can base the deduction on that. But if she does contribute to the company retirement fund, her deduction is limited to 15% of her remuneration that is NOT considered to be part of her pensionable income (eg the deduction may be limited to 15% of overtime pay, or her bonus for example).

      Reply
  171. February 28, 2013 at 8:08 am, Fikile Sokasi said:

    The current value of your retirement annuity

    I would like to know if it’s possible to get the current value of your retirement annuity. I heard a rumor that the sum of your total total contributions is your current value.

    Reply
    • February 28, 2013 at 9:46 am, 10X Investments said:

      Fikile,

      The current value of your RA should be total value of your invested contributions plus the net investment return earned on those contributions. The investment return may be positive or negative (depending on the performance of the underlying investments). The net investment return is the return after fees. You should at least receive an annual benefit statement, that should show you the year-end value of your RA.

      The 10X RA updates benefit statement monthly, discloses your gross and net investment return, and allows members to view their statement online at any time. Other administrators may not be so transparent. Be aware that if you make your RA paid up before maturity date, some life companies may reduce the current value of your RA by early termination charges (so-called “penalties”).

      Reply
  172. February 27, 2013 at 9:54 am, Sonia said:

    “You cannot ever ‘withdraw’ from your RA”

    I have a paid-up RA of R65 000. Can I withdraw said RA at age 55 (this year) and still continue working until age 60?

    Reply
    • February 27, 2013 at 10:42 am, 10X Investments said:

      Sonia,

      You cannot ever “withdraw” from your RA (other than for reasons of formal emigration and ill-health), but you can “retire” from your RA from the age of 55 onward. (Withdrawal and retiring have different meanings in our tax law, and different tax consequences, hence the semantics). As the amount is less than R75 000 you will be allowed to claim the entire balance as cash. You can continue working after retiring from your RA as this is an individual savings product, not related to your employment.

      Reply
  173. February 26, 2013 at 11:10 am, Khwathelani said:

    Pension fund tax tables

    If I resign from my current employment and withdraw from my pension fund with a withdrawal benefit amount of R750 000, how much will I receive net of tax?

    Reply
    • February 26, 2013 at 3:10 pm, 10X Investments said:

      Khwathelani,

      Assuming this is the first time you withdraw from a retirement fund, the first R22 500 will not be taxed, the balance to R600 000 will be taxed at 18%, and the balance to R750 000 at 27%. This means you will pay total tax of R144 450 and get out R605 550. If you transfer the money to another retirement fund, or to a preservation fund, you will pay no tax, until you do withdraw, or you retire. If you retire (earliest age is normally 55), you will pay less tax (only R89 100 on R750 000).

      Reply
  174. February 25, 2013 at 2:44 pm, Kisten Mudaly said:

    Are you compelled to only withdraw 1/3 of your RA?

    My RA is maturing on 28 February 2013. I am 65 years old. The maturity amount was R49 700 on 1 January 2013. Can I withdraw the whole amount, or am I compelled to only withdraw one third of this?

    Reply
    • February 26, 2013 at 11:11 am, 10X Investments said:

      Kisten,

      If this is your only RA, and the total value is under R75 000 when you retire from the RA, then you are entitled to claim the entire amount as a cash lump sum.

      Reply
  175. February 23, 2013 at 3:20 pm, Derik du Plessis said:

    Can you deduct RA contributions against a retirement lump sum?

    Good Day

    I proceeded on early retirement in lieu of health conditions on 31 Dec ’12. My employer paid me a lump sum on which I obtained a tax directive from SARS according to the new tax tables applicable to lump sum payments from retirement funds.

    Does this lump sum payment also constitute income, and more specific, non-retirement funding income on which I can contribute 15% of an RA and get tax relief on it, even though I got some tax relief on the gross lump sum payment?

    Regards
    Derik du Plessis

    Reply
    • February 26, 2013 at 10:28 am, 10X Investments said:

      Derik,

      The Income Tax Act specifically excludes retirement lump sums from non-pensionable income. It is not income and you cannot therefore deduct RA contributions against it.

      Reply
  176. February 22, 2013 at 10:43 pm, Brian Moabelo said:

    Ancillary legislation relating to pension funds

    Give examples of ancillary legislation relating to pension or retirement funds.

    Reply
    • February 26, 2013 at 11:01 am, 10X Investments said:

      Brian,

      Your question defeats the purpose of this FAQ’s forum. Please do your own homework.

      Reply
  177. February 22, 2013 at 3:53 pm, Pam Hoffman said:

    Percentages for investing in equities, bonds, etc

    What are the percentages laid out for RA’s for investing in equities, offshore equities, property, bonds, etc?

    Reply
    • February 26, 2013 at 11:04 am, 10X Investments said:

      Pam,

      These are the same as for pension and provident funds, and are governed by Regulation 28. You can find a full copy of Reg 28 on National Treasury’s website. The portfolio limit applied to shares is 75%. There is no limit on bonds. Offshore equities form part of the 75% limit on shares, but are also subject to the limits imposed by the Reserve Bank’s foreign investment allowance (25%). Reg 28 is quite involved, with many sub-restrictions, so you should refer to the actual document for definitive answers.

      Reply
  178. February 20, 2013 at 5:13 pm, Gawie said:

    Early RA withdrawal when immigrating

    Hi,
    I’m residing in Australia and have a retirement annuity with Sanlam. The fund was made “paid-up” in 2008. As far as I know I can now withdraw the fund as the law has changed to allow early withdrawal when immigrating.
    Is this the case and if so, what tax would need to be paid?
    Thanks and best regards,
    Gawie

    Reply
    • February 22, 2013 at 9:59 am, 10X Investments said:

      Gawie,

      This is the case, but only if you go through the formal emigration process with SARS first (refer to our blogs on this matter, via our Homepage). You will pay tax per the withdrawal lump sum tax table, ie the first R22 500 is not taxed, the balance to R600 000 is taxed at 18%, the balance to R900 000 at 27%, and the remainder at 36%.

      Reply
  179. February 20, 2013 at 1:56 pm, Wynand Vivier said:

    Should you transfer your funds to one RA or purchase separate one’s?

    I have a few small RAF’s and are retiring soon. Should I transfer them to 1 fund (Sec 14) or should I purchase separate annuities? Which is the best option?

    Reply
    • February 22, 2013 at 10:02 am, 10X Investments said:

      Wynand,

      When you purchase your annuities, you should shop around for the best deal going among the life companies. Assuming you will retire from all your RAs at the same time, it would then make sense to give each of your RA’s the best deal in town (ie to buy just one annuity with the total proceeds). It will also simplify your life and your tax affairs.

      Reply
  180. February 20, 2013 at 12:46 pm, Nicolene Van Den Berg said:

    Can you transfer your SA pension fund overseas?

    Do you know if you are allowed, as a non-resident in South Africa, to transfer your pension fund before the age of 55, to a foreign pension fund? Will you be taxed on the transfer?

    Reply
    • February 26, 2013 at 4:30 pm, 10X Investments said:

      Nicolene,

      You cannot transfer your pension overseas, only the proceeds of your pension. So if you leave South Africa, you will resign from your employer and from your employer’s retirement fund. You will be taxed on the proceeds per the withdrawal lump sum tax table. You can then take the balance with you, subject to our Exchange Control laws. These permit a cash allowance equal to your travel allowance (currently R4m pa). You also qualify each calendar year for a “foreign capital allowance” of R8m per family unit, or R4m per person (if a single person is emigrating). Any excess will be held in a non-resident bank account (formally known as a “blocked rand” account).

      Reply
  181. February 15, 2013 at 10:42 am, Jose Alvaro Ferreira said:

    I have an old retirement policy (no. 57267089100). Can you please advise me on who to contact since I would like to know where I stand with that.
    Thanking you in anticipation
    J.A. Ferreira

    Reply
    • February 15, 2013 at 1:46 pm, 10X Investments said:

      Jose,

      You should consult the insurer with whom you took out the policy. Alternatively, you may have to contact a broker who can help you trace the policy to the issuer.

      Reply
  182. February 13, 2013 at 1:34 pm, Nazeera said:

    Can you decrease your monthly RA contributions?

    When contributing to an RA, say R3 500 per month (max 15%), do you have to continue with the same contribution amount for the entire duration of the investment? Or is it again based on your future salary pa? And if you had to downscale your contributions, say to R1 000 p/m, are there any penalties incurred?

    Reply
    • February 14, 2013 at 10:29 am, 10X Investments said:

      Nazeera,

      This depends on the RA in question. Typically with a policy-based life company RA, you are contractually bound to abide by the agreed amount and escalation terms (this escalation would not be relative to your salary, but a fixed amount/percentage). If you break the agreement negatively (ie lower the contribution) you will most likely be penalised as the broker commission (paid up front by the service provider) is based on the contractual arrangement.

      There are RA’s however that do not require you to use broker, and that are not policy-based (such as the 10X RA). Such RA’s allow you you to vary the contribution, take a contribution holiday and even make your RA paid up, all without incurring a penalty.

      Reply
  183. February 13, 2013 at 1:17 pm, Lynne said:

    Cashing in your retirement annuities

    I am 63 and have retirement annuities amounting to some R600 000. If I cash these in, am I able to take a lump sum of R315 000, with the balance being taxed at 18%, or am I only able to take a lump sum of R200 000, having to buy an annuity with the balance?
    If this is the case, would it be better to keep the retirement annuities and continue adding to them with 15% of funds I received from interest? I pay tax at 40%. I am ill, in a wheelchair and definitely unable to work. I have not been able to work for many years – does this qualify me to cash in the total amount of the annuities due to ill health?

    Reply
    • February 14, 2013 at 10:36 am, 10X Investments said:

      Lynne,

      If you retire from the RA fund, you can only claim a lump sum of R200 000 (one-third). With the balance you must buy an annuity. If you want to cash in the entire amount, you probably will be able to do so on the basis of your ill-health. You will however have to provide the required medical proof. In that case you will be taxed per the withdrawal tax table (not the retirement tax table), which means only the first R22 500 will be tax free, with the balance to R600 000 taxed at 18%.

      As to keeping the funds, and continuing to contribute to the RA, this does make sense if you do not require the money (it sounds like you don’t because you are paying marginal tax at 40% on other income). Contributing to the RA would reduce your tax liability, and shield your investment income earned by the RA from tax. If you then do withdraw from the RA due to ill-health at a later stage, you will likely be taxed at a lower rate on your lump sum proceeds (maximum tax rate above R900 000 is 36%).

      However, to give you a definitive answer on the most appropriate course of action, we would have to do a financial needs analysis.

      Reply
  184. February 11, 2013 at 7:50 pm, Vanz said:

    Maximize your full benefit

    Let’s say that I earn R10 000 and contribute 6% to my companies’ provident fund. I have 2 RA’s which contribute R550 and R250 a month. Please help me understand how the tax benefit is calculated based on these figures and if I am maximizing my full benefit?

    Reply
    • February 13, 2013 at 1:32 pm, 10X Investments said:

      Vanz,

      As a broad principle, if your entire salary is deemed pensionable, or retirement funding income, then you cannot presently claim a deduction on your RA contribution against that income, as you may only deduct RA contributions against non-pensionable/non-retirement funding income.

      However, only the employer can claim the deduction for a provident fund contribution. So if it is you – as opposed to your employer – who contributes to the provident fund, then you cannot claim the provident fund deduction and your salary would not be considered pensionable. You could then claim RA contributions equal to 15% of your salary as a tax deduction.

      In other words: if your employer contributes the 6% to the provident fund on your behalf (by way of a salary sacrifice) you cannot claim the RA contributions; if you are making the provident fund contribution, you cannot deduct that for tax but you can deduct the RA contribution.

      All these little complexities should soon become obsolete, from March 2014, when you will be allowed to deduct 22.5% of your income in respect of all your retirement fund contributions (pension, provident and RA).

      Reply
  185. February 11, 2013 at 11:42 am, Jon Hawkes said:

    Retirement annuity tax advantages

    My wife is not employed and earns only a very small income from a flat rental and thus generally does not pay any tax. Is there any advantage to her contributing to a retirement annuity?

    Reply
    • February 13, 2013 at 1:29 pm, 10X Investments said:

      Jon,

      Being able to deduct RA contributions for tax is obviously a valuable and important benefit. However, there are other benefits, most notably that the investment income earned by the RA is not taxed, and the tax free lump sums at retirement. The taxation of interest income may not be an issue now, but it may become an issue as the investment grows. Also, retirement funds do not pay tax on dividends, whereas your wife would incur a 15% withholding tax if she owned shares in her own name. Note also that any contributions not deducted for tax are returned to you untaxed when you retire (either added to tax-free cash lump sum, or as part of the annuity income).

      Over and above these tax considerations, an RA also helps to create a disciplined savings device, with automatic monthly contributions and restricted access to the money until retirement age (earliest age 55). Also, the RA provider is more likely to invest your money more risk-appropriately than you would do yourself. Of course, not all RA providers are alike; you should consider a low cost provider that you can approach direct (to avoid adviser commissions), that is transparent on fees and that does not charge penalties should you wish to alter your contribution regime.

      Reply
  186. February 09, 2013 at 12:22 pm, JP said:

    Employer-sponsored retirement funds

    When employed in 2009 I was never offered a pension fund with the company. Most employees are on the scheme and others that joined after me were also offered. It is four years later and I feel I have been done in. I have never been given a contract of employment either. Can I take my employer to the CCMA?

    Reply
    • February 13, 2013 at 11:20 am, 10X Investments said:

      JP,

      Key principles: only eligible staff members per the fund rules may join an employer-sponsored retirement fund. And if a company has an existing retirement fund, all joining employees eligible for membership must join the fund. This is a requirement set down in our Income Tax Act.

      If the fund was started while you were an employee, you would have the option to join or not. Most funds require an opt-in from employees, ie you would have had to choose to join, and do so within the first twelve month of launch date.

      Assuming the fund was up and running when you joined, the critical question is: were you eligible to become a member per the fund rules? Perhaps you were classified as a contract worker, and the fund rules only permit permanent staff? So, before you take your employer to the CCMA, inquire with your HR department whether you are in fact eligible to join the fund.

      If you are eligible, you should inquire what you were not made a member of the fund, as required by the ITA, and you should alert your employer to the fact that it is in breach of the Act, which may result in the fund losing is tax exempt status.

      You should look to remedy this situation with your employer before running off to the CMMA. Given that it has taken you four years to register your complaint, you may not have a strong case unless you can show that you tried to join the fund repeatedly, and your employer deliberately and willfully stopped you from saving for your retirement.

      Reply
  187. February 06, 2013 at 11:51 am, Steven said:

    Your retirement annuity plan

    Is there a limit to the amount you can invest in an annuity plan?

    Reply
    • February 06, 2013 at 1:54 pm, 10X Investments said:

      Steven,

      There is no limit as to how much you can invest in an annuity, but your present tax deduction is limited to 15% of non-retirement funding income (retirement funding income is the income base used to calculate the contribution to your pension/provident fund). Any contribution not allowed for tax is carried forward to future years; any contributions not claimed by the time you retire are returned to you tax free (either added to your cash lump sum, or as an untaxed portion of your annuity).

      Reply
  188. February 04, 2013 at 11:49 am, Elias said:

    Can I cash in my whole retirement annuity?

    My retirement annuity matured on 1 February 2013. I am above 55, but have not retired. Will retire at 60 or 65. Am I compelled to cash in 1/3 or can I cash in the whole retirement annuity? I need the cash. What are my options?

    Reply
    • February 04, 2013 at 1:33 pm, 10X Investments said:

      Elias,

      You have the following options:
      1. Retire from your RA, and buy an annuity with at least two-thirds of your proceeds. You are not compelled to cash in at least one-third, but you are compelled to buy an annuity with at least two-thirds
      2. Make your RA paid-up (ie stop contributing), but keep it invested until the time you do choose to retire (any time)
      3. Keep your RA and keep contributing for as long as you wish.

      You cannot cash in your entire RA unless you emigrate formally, or due to proven ill-health. If you continue working, you will not be able to claim ill-health.

      Reply
  189. February 01, 2013 at 11:39 am, Marion said:

    When can you apply for your RA?

    My RA mature in May 2013 – could I apply for it now?

    Reply
    • February 04, 2013 at 9:44 am, 10X Investments said:

      Marion,

      You can retire from your RA from the age of 55 onward, also before maturity date. You may however incur a modest early termination penalty (given that you are so close to maturity date, it should be negligible).

      Reply
  190. January 30, 2013 at 2:26 pm, Aldo said:

    Can you buy a living annuity with your personal savings?

    Hi, I will be retiring on 30/09/2013. Can I buy a living annuity with my personal savings, say, R1 million?

    Reply
    • January 31, 2013 at 1:29 pm, 10X Investments said:

      Aldo,

      A living annuity is a retirement savings product, and can typically only receive proceeds from a retirement fund or another living annuity. But you can theoretically circumvent this by first investing your personal savings as a lump sum into an RA, and then retiring from the RA and investing the proceeds in a living annuity.

      You should of course consider such a move carefully, as a living annuity is not as flexible as personal savings, and annual fees can be quite high. But you do save on paying tax on your investment income, although you are of course taxed on the withdrawals.

      Reply
  191. January 30, 2013 at 1:52 pm, Dalton Morgan said:

    Explaining tax deduction on retirement annuities

    South African revenue services require us to calculate tax on the total sum of annuity income payments, rather than on each individual annuity income payment you may receive from Momentum. An aggregated tax rate is applied and tax is deducted from each annuity income payment. If you have provided Momentum with an income tax directive or a preferred tax rate, your tax deducted or your income payable may increase or decrease. Could you please explain the meaning of this paragraph?

    Reply
    • January 31, 2013 at 10:32 am, 10X Investments said:

      Dalton,

      Your annuity income is taxed according to the prevailing personal income tax table. It is a progressive tax table, which means that the more income you earn, the more tax you pay on your marginal income, up to the maximum marginal rate of 40%.

      Say you received one annuity income stream of R200 000 pa. Per the current table, you would be liable for tax of R27,360 thereon. But an annuity income of R100 000 pa attracts only R6 560 tax. So if you received two annuity incomes of R100 000 pa and they were taxed individually, the total tax deducted would be only R13 120. Then, come tax return time, you would owe SARS another R14 240, which you would possibly have spent already. So it is important to specify your total annuity income upfront, to ensure that the appropriate tax deducted, based on your entire annual income and likely average tax rate.

      If you receive income from other sources (eg rental or employment income), your marginal tax rate may be even higher. You can then advise the insurer to deduct tax at a higher rate, to avoid a large tax bill at year end.

      Reply
  192. January 28, 2013 at 3:02 pm, Jacques said:

    Can you re-invest your matured RA?

    Hi, I have an RA that is maturing in March 2013 – Can I take that money out and re-invest all of it into an equities investment with a different or the same company? – Liberty

    Reply
    • January 29, 2013 at 1:27 pm, 10X Investments said:

      Jacques,

      If your RA is maturing – implying that you are over 55 – you have the option to either retire from the RA, to stay invested in the RA (you can keep contributing or make it paid up), or to transfer to another RA (with the same company or another company). If you choose to retire now, you may only access one-third as cash, you must use at least two-thirds to buy an annuity. You can invest the one-third (net of lump sum tax) as you wish. But you cannot invest 100% of your RA benefit tax-free into another investment product (other than another RA).

      If you stay invested in the RA, make sure that your (broker-related) fees cease, as the administrator will have recovered all of the upfront fees charged against your investment.

      Reply
  193. January 28, 2013 at 2:21 pm, Zane said:

    “Amount brought forward” and “amount carried forward”

    Hi, can u please elaborate on the following: There is an item “amount brought forward” and “amount carried forward” on my tax statement on SARS e-filing which I cannot seem to calculate. These RA amounts date back to previous years; I know that R1 800 pa is allowable as carry-over and that all amounts not previously allowed as deductions are carried over, but this tax law is very ambiguous to me and not properly explained. Any assistance would be greatly appreciated! Thank you

    Reply
    • January 29, 2013 at 4:28 pm, Zane said:

      Your SARS tax statement

      Thanks for the feedback. I should have stated that the carried forward and brought forward amounts relate to “current retirement annuity fund”. I still cannot get the same SARS amounts that they quote – do you know what is included in these 2 amounts? Thanks!

      Reply
      • January 31, 2013 at 10:22 am, 10X Investments said:

        Zane,

        We would have to look at the specific example that you quote, to reconcile the numbers. The most obvious difference in interpretation lies in the definition of non-retirement funding income, as this is the basis for the contribution deduction. We posted a reply on 23 January this year that addresses this issue in some detail.

        Also remember that your permitted deduction is the greater of
        1. 15% of taxable income other than from retirement funding income (income used by your employer to calculate contribution to your employer’s pension or provident fund)
        2. R3 500 less current contribution to a pension fund
        3. R1 750

        SARS will also take note of your contributions to a provident and/or pension fund that you were unable to claim for tax. Presently you cannot deduct your contribution to a provident fund or contributions to a pension fund more than a 7.5% of your retirement funding income.

        Reply
    • January 29, 2013 at 2:18 pm, 10X Investments said:

      Zane,

      You have to distinguish between arrear contributions and unclaimed contributions. An arrear contribution relates to a contribution you should have made in a prior year, but didn’t. This really only comes into play if you temporarily lapsed your contributions, and are now re-instating them. You may only claim R1 800 of such contributions per annum.

      Unclaimed contributions relate to contributions made in the current year that you could not claim for tax, because your contributions were in excess of 15% of your non-pensionable income. SARS carries forward the contributions you could not claim, and will allow them as a deduction against future non-pensionable income (subject to the same 15% annual limit).

      Reply
  194. January 28, 2013 at 12:38 pm, Chris said:

    The new retirement savings tax regime

    How do you calculate whether you’re receiving the maximum benefit from tax on a retirement fund, using the new retirement savings tax regime which comes into force on March 2013? I am contributing to both an occupational pension (employer) and voluntary RA. I am currently contributing roughly R3 000 to the pension and R3 000 to the voluntary RA. My previous employer did not have a pension fund so I joined the voluntary RA. Now that I am with the new employer, I have decided to keep on contributing to the RA. Let’s say my annual salary is R500K.

    Reply
    • January 29, 2013 at 2:08 pm, 10X Investments said:

      Chris,

      The new regime will only come into force in March 2014. The date given in the Personal Finance section on Saturday is incorrect. The new deduction base will refer to the higher of your employment or taxable income. You will be allowed to deduct 22.5% of this number in respect of your retirement fund contributions, irrespective of into what type of funds these go (pension, provident or RA). This will be subject to annual limit of R250,000 if you under 45, R300 000 if you are 45 or older. If your annual income is R500 000, you may then deduct R112 500 pa, (effectively R9 375 per month), covering both your pension and RA contributions. However, the limit will also cover your employer’s contribution to the pension fund.

      The new regime will benefit you if your present salary/income is entirely pensionable, which means you presently have no leeway to deduct 15% of non-pensionable income in respect of your RA contributions.

      Reply
  195. January 27, 2013 at 6:54 am, Shaun said:

    Oversubscribing to an RA

    If you oversubscribe to an RA in any one year, will SARS allow the oversubscribed portion to be deducted in future years, subject to the limit of 15% of non-retirement funding income in each year? Example: Income in year 1 is R200 000 and R60 000 is contributed to an RA. In year 1 SARS will allow 15% (R30 000) as a deduction. If income in year 2 is R200 000, will SARS allow the balance of the contribution (R30 000) as a deduction against year 2′s income?

    Reply
    • January 29, 2013 at 9:41 am, 10X Investments said:

      Shaun,

      That is correct. SARS keeps a tab on contributions that were not deducted in any one year and carries these forward. Investors can then either claim them in future years (subject to the annual limit) or add them to their tax-free cash lump sum at retirement.

      Reply
  196. January 25, 2013 at 10:50 am, Seilane Napthali Ngxotheni said:

    Can you withdraw from your RA before retirement?

    Is it possible for me to withdraw cash from my retirement annuity?

    Reply
    • January 25, 2013 at 11:26 am, 10X Investments said:

      Seilane,

      You may not withdraw from your retirement annuity (other than for reasons of ill-health or emigration, both of which you need to prove quite rigorously). You can only access your benefits at retirement, earliest at the age of 55.

      Reply
  197. January 24, 2013 at 8:51 pm, Stephen Seetsa said:

    The benefits of retirement annuities

    What is the purpose of a retirement annuity?

    Reply
    • January 25, 2013 at 11:02 am, 10X Investments said:

      Stephen,

      A retirement annuity is a tax effective retirement investment vehicle for individuals. The primary target market is individuals who do not participate in a pension or provident fund.

      Retirement annuities are appropriate for:
      1. Self-employed people
      2. Employees in organisations that do not provide a pension or provident fund
      3. Employees who earn a significant amount of non-pensionable income and wish to increase their savings towards retirement

      Retirement annuities can also be used to house the proceeds of your pension or provident fund when terminating your employment.

      There are three tax benefits:
      1. Contributions are tax deductible – up to a maximum of 15% of non-pensionable taxable income. If you contribute more, you may claim excess amounts in future tax years. You may also add your excess contributions to the tax-free portion of any lump sum you receive.
      2. Investment returns are tax free – there is no income tax or capital gains tax on the investment return earned in a RA.
      3. Benefits are taxed on a favourable basis – lump sum benefits are taxed on a sliding scale with a portion of the benefit tax free (see details under “What is the tax on your RA benefits?”).

      Reply
  198. January 24, 2013 at 11:50 am, Richard said:

    Do you pay personal income tax on the amount when withdrawing from an RA?

    If I withdraw R600 000 from my RA, in addition to the 18% tax I’ll pay on the amount greater than R22 500, will I also pay personal income tax of 40% (which is my maximum tax rate)?

    Reply
    • January 25, 2013 at 10:59 am, 10X Investments said:

      Richard,

      You cannot withdraw from your RA unless you have retired early due to ill-health or you are formally emigrating. You can retire from your RA from the age off 55. Cash lump sums are only taxed once, either per the withdrawal or the retirement lump sum tax table. These lump sum are not taxed again as personal income, but the annuity you have to buy with two-thirds of your proceeds at retirement will be taxed annually per the income tax tables.

      Reply
  199. January 23, 2013 at 1:48 pm, Deon said:

    Do you forfeit your RA if you seize contributions?

    What happens to my life insurance policy if I retire and cannot afford to continue paying the policy? Will I have wasted my money?

    Reply
    • January 24, 2013 at 10:43 am, 10X Investments said:

      Deon,

      This depends on the specific terms of your insurance policy. Risk benefits (life cover, dread disease, disability, etc) lapse once you cease paying your premiums. But some long term insurance policies do have an investment or savings portion, or a retirement funding option.

      If your policy has an investment or savings portion then your policy may have a surrender value payable to you. Alternatively, if your policy has a retirement funding option then you may be able to fund your retirement by drawing down from the insured amount. But if your policy if for a “pure” life cover, then you will not have any of your premiums repaid to you.

      So scrutinise your policy’s terms and conditions, to see what cover you have and when it matures and whether non-risk benefits lapse automatically if you cease paying premiums.

      Reply
  200. January 21, 2013 at 1:41 pm, Heather Roycroft said:

    Retirement Funding Income explained

    Please explain Retirement Funding Income in detail.

    Reply
    • January 23, 2013 at 11:36 am, 10X Investments said:

      Heather,

      This is a term from the Income Tax Act (ITA). A recent National Treasury discussion paper (E), discussed the various definitions in some detail. We have copied the relevant part below. Hopefully, this will all become obsolete with the proposed reforms due to be implemented next year.

      The main points of the different income bases can be summarised as follows:

      “approved remuneration”: In the context of the ITA, it means the total remuneration accruing to the employee in respect of his employment as the Commissioner considers to be fair and reasonable in respect of services rendered. The examination takes into account the value of the services rendered in relation to the cash and other benefits received in return.

      “retirement funding employment”-income: According to the ITA, it is “remuneration” as defined in the Fourth Schedule to the ITA; excluding 50% of any public office allowance or transport allowance, any retirement fund lump sum or retirement fund lump sum withdrawal benefit; but including any travel allowance unless it is a travel reimbursement based on actual distance travelled at not more than the gazetted rate.

      “non-retirement-funding employment”-income: As per the ITA, this amount is calculated by taking all the income derived by the taxpayer during the year of assessment, and deducting any “retirement funding employment”-income. Non-retirement funding income excludes any retirement fund lump sum or retirement fund lump sum withdrawal benefit.

      Although there are three distinct calculations, in practice the same value is often attributed to “approved remuneration” and “retirement-funding employment”-income. The rules of a retirement fund typically define “pensionable salary” for the purposes of contributions made by the employer and the employee, as well as (where applicable) the value of the benefit payable in the case of fund-provided risk benefits.

      Where the retirement fund only has one contributing employer, the rules of the fund may define the actual determination of the “pensionable salary” (being “retirement-funding employment”-income), for example as only including fixed remuneration (e.g. salary or wages), and excluding variable amounts such as commissions, bonuses and overtime etc. In the case of an umbrella fund, the norm is for the rules to allow the contributing employer to determine the components included in ‘pensionable salary’ and its value.

      In practice, the split of an employee’s income received from the employer is divided by the employer between “retirement funding employment”-income and “non-retirement funding employment”- income on the income tax certificate [IRP5/IT3(a)] provided to the employee and to the South African Revenue Services (SARS).

      Reply
  201. January 18, 2013 at 1:30 pm, Alexander Stevens said:

    Under which circumstances can you not retire from your RA?

    Can I cash in my annuity? I am receiving my pension. I am aged 58.

    Reply
    • January 23, 2013 at 10:41 am, 10X Investments said:

      Alexander,

      At age 58 you can retire from your annuity. Unless the balance is under R75 000, you will have to use two-thirds of the fund value to purchase an annuity. You may cash in up to one-third of your fund balance.

      Reply
  202. January 17, 2013 at 11:02 pm, Alan said:

    Preservation fund or RA?

    Hi, I am about to take an early retirement incentive package and need to know what is best to do with my provident fund, ie preservation fund or RA. I am 62 and do not intend to retire until 65.

    Reply
    • January 18, 2013 at 11:47 am, 10X Investments said:

      Alan,

      If you transfer to a provident preservation fund, you are allowed to make one full or partial withdrawal before retirement. At retirement, you can take the remainder (or the full balance) as cash, ie you do not need to buy an annuity.

      If you take out an RA, you do not have the option to do a partial withdrawal before retirement. You can only retire from the RA (subject to some exceptions which are not relevant here), but you can do so at any stage once you are older than 55. At retirement you can take one-third as cash, plus any contributions you did not deduct for tax (ie your entire transfer from the provident fund, where the contributions were deducted by your employer, not by you). Effectively, this will probably mean that – if you withdraw within three years – you will be able to claim the entire RA as cash as well. The one advantage with the RA is that you can make further contributions, which you cannot do with a preservation fund.

      So your decision essentially is between the withdrawal flexibility of a preservation fund, and the ability to make further contributions to an RA. Of course, you can have both by transferring to a preservation fund AND taking out an RA if you want to keep contributing.

      Given your age and intentions, both these points are probably non-issues. Administratively, the preservation fund is the more practical option.

      Your main focus should rather be on costs – which is the cheaper option, where can I avoid a broker, transfer charges and high investment fees? – and your asset mix. The asset mix should reflect your time horizon. If you plan to cash out at 65, you should limit your exposure to more volatile asset classes, such as equities and and hold more low risk (less volatile) assets such as cash.

      Reply
  203. January 16, 2013 at 9:51 am, Gillian said:

    Can you cash in your RA upon resignation?

    Good morning. If I resign, can I withdraw my Allan Gray Retirement Annuity?

    Reply
    • January 18, 2013 at 11:26 am, 10X Investments said:

      Gillian,

      An RA is a retirement product for individuals, and the contract is between you and Allan Gray, not between your employer and Allan Gray. This also holds true if you are member of a Group RA. When you leave, your RA goes with you. You have the option to keep making payments directly, or to make it paid up. But you cannot withdraw unless a) the balance is R7 000 or less, b) you emigrate formally or c) you retire early due to ill-health. You may retire from your RA from the age of 55 onward.

      Reply
  204. January 14, 2013 at 11:49 am, Johan said:

    “Deduction at source” explained

    Good Day,
    In 2007 my Liberty broker recommended that it is a good idea to do the so-called deduction at source, in other words, where RA deduction is done by the payroll department. Obviously the tax advantage will reflect on the pay slip. Where does the deduction for the full amount goes? Must it be done paid by the payroll to Liberty?

    Reply
    • January 15, 2013 at 11:28 am, 10X Investments said:

      Johan,

      If your employee facilitates your RA contribution, then your employer will deduct the contribution from your pay. The RA administrator (Liberty) in turn will bill your employer for the amount owing every month; your employer will verify the bill (there may be other employees on this scheme) and then pay the amount owing across to the RA administrator. This situation tends to arise when an employer runs a Group RA scheme; it is uncommon for this to happen in respect of individual RA’s due to the administrative burden placed on the payroll department and the administrator.

      Reply
  205. January 13, 2013 at 10:06 pm, John said:

    Should you invest the balance of a mature RA in other exiting RA’s?

    Hi, I turn 55 in October 2013, but have an RA that matures in Feb 2013 and I am in full-time employment. The value is approx. R600 000. I have not cashed in or received lump sums before. Should I take the first R300 000 tax free and invest the balance in other exiting RA’s that I have? Thanks

    Reply
    • January 15, 2013 at 11:23 am, 10X Investments said:

      John,

      You can only retire from your RA once you are 55 (in October). At that point, you can take one third as a cash lump, with the balance you must buy an annuity. The first R315 000 of the cash lump sum is not taxed.

      In your case, you may take R200 000 as a cash lump sum (tax free), the balance must go towards an annuity. The option to invest R300 000 in another RA is not available to you. Receiving an annuity income while you are still receiving regular income is generally not such a good idea as the income will be taxed at your marginal tax rate, which is likely to be much higher now than when you retire. Also, you probably don’t need the money right now, and you may benefit in retirement by letting your savings grow for a bit longer.

      Note that even though your RA is maturing, this does not mean that you have to cash in – you can stay invested thereafter for as long as you wish; alternatively you can transfer the entire amount to another RA provider (perhaps one that charges lower fees) without fear of a termination penalty.

      Reply
  206. January 12, 2013 at 2:08 pm, Hayley said:

    Can you draw interest from a retirement annuity fund?

    Having resigned from a previous employer, I invested my monies into a retirement annuity fund of which only draws interest with no additional contributions from myself since then. Do I declare this on my tax return and how/which option on my tax return would I need to tick to indicate this?

    Reply
    • January 15, 2013 at 11:20 am, 10X Investments said:

      Hayley,

      You cannot draw interest from a retirement annuity fund. If you transfer your retirement fund proceeds into a RA, that money is locked up until you reach the age of 55. At that point, you can access one-third as a cash lump, with the balance you must purchase an annuity (effectively a pension that pays out for life). But as a general rule, if you are receiving some form of interest income, this will be taxed, although the present tax law exempts the first R22 800 from tax (R30 000 if you are 65 or older). You must show this under “interest income” on your tax form. If you are actually receiving an annuity income, you must include this as part of your gross income (without an exemption).

      If you are actually in receipt of an annuity income, you must include the proceeds.

      Reply
  207. January 11, 2013 at 9:18 pm, Jose Ferreira said:

    The Pension Fund Adjudicator only offers rulings on complaints

    Hi,
    I’m 62 years old and I’ve invested R511 500 to date since May 2006 in an RA with Discovery. Presently the total fund value is R592 700 and the investment maturity date is May 2016. I would like to cash in, but Discovery quoted R60 000 in penalties. Should I get advice from the Pension Fund Adjudicator?
    Thanking you,
    Jose

    Reply
    • January 15, 2013 at 11:08 am, 10X Investments said:

      Jose,

      Unfortunately, the Pension Fund Adjudicator does not offer advice, only rulings on complaints. The “termination penalty” should be covered in the Terms & Conditions of your RA. You may have a case if Discovery is in breach of its own T&Cs, or you believe the amount has been incorrectly calculated.

      “Termination charge” or “termination penalty” are phrases used by the life insurance industry to create the impression that you are being punished for breaking a contractual term of the agreement, and that this penalty could be avoided by staying put.

      That is wrong. The “termination penalty” is nothing more than an accelerated recovery of upfront costs incurred on your behalf. These costs relate mainly to the sales commission and the life company’s “new business” costs. These expenses are paid or incurred up-front and recorded as a liability (debt) against your RA.

      This liability initially grows as the life insurance charges you interest on its loan. The liability reduces by the fees deducted from your investment. After two years, your debt to the insurer may be larger than your RA balance.

      The debt is recovered either over the life of the policy or as a “termination penalty” (on a transfer or making your RA paid-up). In other words, this is largely a “sunk costs” (other than the interest still accruing on the loan) that you have already incurred and that you have to pay one way or another.

      The amount of the recovery (“termination charge”) depends on a number of factors including the contractual term (length) of your RA contributions, the commission rate agreed with your broker, the period you have held the RA and the interest rate charged by the provider.

      The longer the contractual term and the higher the commission rate, the higher the recovery is likely to be. The longer you have held the RA, the greater the amount already recovered by the life company, and the smaller the “termination charge” is likely to be. The interest rate charged depends on the service provider; some have been known to charge rates not far off the usury rate.

      In the past there was no limit to the amount of the penalty and some investors forfeited their entire investment (often under circumstances when they could least afford to do so, as on retrenchment). Understandably, this caused much unhappiness, to the extent that the law has now been changed, limiting the recovery to 30% of the investment value. Even better, life assurance RA’s sold from 1 January 2009 restrict the penalty to 15% of the investment value on transfer.

      Reply
  208. January 11, 2013 at 9:47 am, Hannes said:

    An RA is retirement savings product for individuals

    Hi,
    I have a retirement annuity with Discovery. I used to be with Metal Industries, but my company changed to Discovery. As I am not with said company anymore, I would just like to know what to do with my annuity.

    Reply
    • January 15, 2013 at 9:15 am, 10X Investments said:

      Hannes,

      An RA is retirement savings product for individuals. Some companies provide a Group RA for their employees, but the contract is still between you and the RA provider. So when you leave that employer, your RA goes with you. You have the option to make it paid up (ie stop making contributions), or to continue contributing in your own name. If you stop contributing, you may incur an early termination fee. You also have the option to transfer the RA to another service provider (for example, to one that charges much lower fees, such as the 10X RA), but then again, you may incur an early termination charge.

      You can only access your RA (paid up or not) once you are 55. At that point, you may take one third as a cash lump, with the balance you must buy a pension or annuity from a life insurance company.

      If you have joined a new employer, and are contributing to that employer’s retirement fund, you may find that you no longer qualify for some or all of the tax deductions you were able to claim on your RA contributions in the past (your tax deduction is limited to 15% of non-pensionable income). Then, again, you should consider whether to keep contributing to the RA or not.

      Reply
  209. January 10, 2013 at 9:48 pm, Thagy said:

    Can I take out a tax lump sum and commute the balance to my present pension?

    I turn 55 this year and am currently employed, contributing towards a pension fund. Apart from this pension fund, I purchased a single premium RA when I resigned from my previous job. At 55, can I take out a tax lump sum and commute the balance to my present pension?

    Reply
    • January 11, 2013 at 1:57 pm, 10X Investments said:

      Thagy,

      As you have reached the age of 55, you can retire from your RA. You will be entitled to take a cash lump equal to one third of the proceeds plus any contributions not allowed for tax (potentially your entire single premium contribution). With the balance you must buy a annuity. The annuity portion is not negotiable unless the amount to be annuitised is under R50 000.

      The option you desire – which is available for occupational funds (ie withdraw, take a portion as cash and transfer the balance to another fund) – is not available with a RA. However, your (pension) fund rules permitting, you may be able to invest a part of your cash lump into your pension fund. To the extent that this is not deducted for tax, it will also be returned to you tax free when you withdraw or retire from the pension fund.

      Reply
  210. January 09, 2013 at 9:55 pm, Kgadi Moloto said:

    Is there a South African company that deals with the transfer of pensions?

    Hi, is there a South African company that deals with the transfer of pensions from outside of SA into SA?

    Reply
    • January 11, 2013 at 1:53 pm, 10X Investments said:

      Kgadi,

      As this is primarily a tax matter, and you may require an advance ruling from SARS on this, you should probably consult a South African tax adviser.

      Reply
  211. January 07, 2013 at 9:58 am, Mak said:

    Can you stipulate that the contribution go up, down, or neither at anytime?

    Hi, great info on RA’s.
    Can you stipulate that the contribution go up, down, or neither at anytime?
    Also, can you stop contributing (say if you are out of a job for a while) and then continue with contributions thereafter?
    Are there charges/penalties involved with this scenario?
    Thanks in advance for your learned response.
    Mak

    Reply
    • January 08, 2013 at 9:59 am, 10X Investments said:

      Mak,

      10X does not charge penalties or transfer fees on any of its products, or under scenario. The contribution rate with the 10X RA is flexible, but with a minimum of R1 000 per month. You may increase of decrease your contribution without penalty, and you can also take a contribution holiday if necessary (again without penalty). The reason we do not charge penalties is that we do not load your account with upfront or selling costs (as is the convention with life insurance RA’s), and we therefore do not have to accelerate the recovery of these costs when you drop your contribution rate.

      Reply
  212. January 04, 2013 at 10:46 am, Justin Smith said:

    Should you re-invest in an RA or a bond?

    Hi,

    My mother has a retirement annuity with Liberty, which has a current value of R300 000 and a projected value of R400 000 when it matures in 2015. We are in grave financial difficulties and have taken out several personal loans in the recent past. We are now in the position where we need about R60 000 in order to clear credit card debt and other accounts. My question thus is can we cash out R80 000 and re-invest the rest, or is it more feasible to invest the remaining R220 000 (before tax) into our access bond account which we service with an interest rate of 6,5% pa? We also derive a monthly income of R2 700 from the RA, but it is not enough to cover our monthly expenses.

    Kindly advise.

    Reply
    • January 07, 2013 at 10:12 am, 10X Investments said:

      Justin,

      Your question crosses the line, in terms of requesting specific financial advice, which we may not provide without a full needs analysis. We can only offer you generic advice and insight. By law, your mother cannot cash in her RA unless she has a) retired early due to ill-health b) the paid-up amount is less than R7 000 or c) she is formally emigrating. But if she is older than 55, then she can retire form her RA, even before the RA’s maturity date. She may incur a small early termination penalty. The problem is that she can only cash in on-third as a lump sum (plus any contributions not allowed for tax). Still, that would provide a cash lump sum of around R100 000. She must use the balance to purchase an annuity. It is unclear to us why you would be earning a monthly income off an RA (an RA is savings product, not a draw-down product), so you should perhaps revisit whether all the information you have provided, or the terminology you have used, is accurate. (It may be that your mother inherited an RA, and re-invested a portion into the current RA, and used the rest to purchase an annuity. If that is the case, you may well be entitled to a larger cash lump sum).

      The question whether to re-invest in a RA or into a bond depends on the individual’s need and circumstances. There are issues of tax, the investment time horizon, financial risk and flexibility to consider and compare. The long term return on a well-diversified portfolio of shares, bonds and cash is likely to beat the cost of the mortgage, but if you have a short term time horizon, the you would need to invest in lower risk assets (mainly cash), which would likely earn a much lower after-tax return than the cost you are presently paying on your bond.

      Reply
      • January 07, 2013 at 2:55 pm, Justin Smith said:

        Hi

        Thanks for valuable information. I now understand the full nature of the situation. My mother has had several RA’s in the past which have been cashed in and so my understanding of the law is that only 1/3 of total annuities can be cashed in as a lump sum and the rest re-invested, in which case my further understanding is that no further withdrawls can be made on the Liberty RA which pays a monthly benefit until it matures in 2015.

        Reply
  213. January 03, 2013 at 7:15 pm, Dean said:

    Should I take the lump sum or invest in a new retirement fund?

    Hi, some back ground info first. I am a SA passport holder, but living in the USA as a tax/permanent resident. I’ve never filed a tax return with SARS and don’t even think I’m registered with them. I left SA a couple of years after school. I have a regular SA bank account that my mom deposits small amounts in to keep it open.
    My dad recently passed away and I’m a beneficiary to his estate. I’m not sure what type of fund it is (may be pension), but I was given the option of a cash lump sum of roughly R350 000 after tax or R420 000 into a new retirement fund for myself!

    Now my question finally, if I take the cash option and it is paid into my SA bank account, will I be liable to pay taxes on any interest earned if I leave the money in that account? Also, I’ve been reading other answers on the site about “formal emigration” which you have not done, so what would be the best option for me: the cash lump sum or a new retirement fund?

    Reply
    • January 07, 2013 at 10:28 am, 10X Investments said:

      Dean,

      This is essentially a tax question, not a retirement fund question. You will find the answers you need on the SARS website. The critical question is whether SARS will consider you to be a non-resident or not. Based on the information provided, SARS will probably not classify you as ordinarily resident in SA, and therefore tax you as a non-resident. The Income Tax Act makes specific provision for the exemption of interest received by or accrued to any person who is a non-resident. Under this exemption the full amount of the interest is exempt from income tax. This exemption is not applicable if that person is a natural person who was physically present in South Africa for a period exceeding 183 days in aggregate during that year of assessment; or at any time during that year of assessment carried on a business through a permanent establishment in South Africa.

      The issue of emigration does not arise if you chose to receive the tax lump sum. But you can expect complications when you want to transfer the money overseas, and your bank wishes to get tax clearance for you (and SARS has no idea who you are, which means you may have to prove your non-resident status). Ideally, you should consider opening a non-resident tax account.

      If you chose to re-invest in a retirement fund (a retirement annuity fund), you money is locked up until the age of 55 unless you go through the formal emigration process.

      To find the solution right for you, you must decide whether you plan to return to SA or not. If you see your future in the US, then it appears inappropriate to lock up your money in a South African retirement fund, as your liability (your retirement expenses) is denominated in USD whereas your asset is denominated in rand.

      Reply
  214. January 03, 2013 at 2:41 pm, Cat said:

    Is the Financial Services industry exempt from the CPA?

    Hi there – thank you for the wonderful site. I was wondering about the implications of the CPA on a retirement annuity. Under the act, are you not permitted to terminate your agreement with your provider?

    Thank you

    Reply
    • January 07, 2013 at 10:26 am, 10X Investments said:

      Cat,

      The Financial Services industry is exempt from the CPA – consumers can seek protection and redress by other means, such as those provided by the FAIS ACT.

      Reply
  215. January 03, 2013 at 12:44 pm, Carl said:

    Can you make a monthly contribution into an existing RA?

    I am currently 57 and have a small RA with Liberty, the current value being R73 500. Can I take the full amount? Will there be tax on the amount that I may take? Can I make a monthly contribution into an existing RA?

    Reply
    • January 07, 2013 at 10:34 am, 10X Investments said:

      Carl,

      If you have multiple RA’s, the Receiver will view these in aggregate, not individually, ie you cannot rely on the “minimum R75 000″ provision to cash in your entire RA. If would be too easy to circumvent the Tax Act otherwise, by simply investing in a series of RA’s, and keeping each under R75 000. As you are over 55, you can cash in your small RA, while still contributing to your other RAs for as long as you wish. The tax you will pay on the one-third cash lump depends on whether you have previously received lump sum benefits from past retirement funds. If not, your lump sum will not be taxed (the first R315 000 of your aggregate lump sums on retirement is not taxed).

      Reply
  216. December 29, 2012 at 4:21 pm, Anusha said:

    Retirement Annuities and dual citizenship

    Hi
    Can a paid up Retirement Annuity be withdrawn in totality with dual citizenship (ie south african and australian)
    Thanks
    Anusha

    Reply
    • January 03, 2013 at 6:26 am, 10X Investments said:

      Anusha,

      It is not a question of citizenship. A paid up RA can withdrawn in totality (ie without converting two-thirds into an annuity) if a) the amount is below R7,000, b) the holder has to retire early due to ill-health or c) the holder has formally emigrated. If you now live in Australia, and you have formally emigrated (signed off with SARS), then you can apply to withdraw from your RA. You will pay withdrawal tax on the proceeds, and you can then transfer the balance overseas.

      Reply
      • January 17, 2013 at 1:21 pm, Brian Levin said:

        How to cash in your RA when living overseas

        I am 60 years old and have a RAF with a maturity value of 0,000 Rands. I did not formally emigrate, but have been living overseas since 1984. I wish to cash in my RAF. What are the procedures?

        Reply
        • January 18, 2013 at 11:31 am, 10X Investments said:

          Brian,

          The RA cannot be paid out by the administrator without a tax directive from SARS. If you left SA without saying goodbye, this may be problematic, as SARS will probably not know who you are.

          So, you will probably first have to establish your identity with SARS, possibly by reviving you old tax/ID number, and resolving any outstanding points on your file. If you want to have the money paid out as a lump sum, you will also have to go through the emigration documentation process with SARS. You will have to prove your emigration/tax status in another country. SARS will also require you to fill in certain forms, which must be submitted as originals. Once you have succeeded, your administrator may agree to pay the money directly across to your offshore bank account (not via a SA non-resident account).

          If you do not go through the emigration process, your money will be paid out per SA retirement law, which means you can only take one-third as a cash lump sum, with two-thirds you must buy an annuity. SARS still has to issue a tax certificate, so there is no way you can really get past dealing with them. That money must be paid into a SA bank account, which means you will have to open a non-resident bank account.

          As you can gather, this is not a simple process. You will have to correspond by snail mail with a government department, so this could really stretch your patience. It may worthwhile to rather engage an emigration specialist, who can assist you with obtaining the necessary documents and clearance from SARS, and open up the necessary bank account on your behalf, if necessary

          We do not recommend (or vouch for) any such service providers, but we are aware of two who do provide such services, namely cashkows.com and SMRJ Consultants. Your search engine will help you locate their web sites.

          Reply
  217. December 25, 2012 at 5:26 pm, Geoff Hippertge said:

    Advice about changing your broker

    Hi, thanks for a great site.

    I have an Allen Grey provident preservation fund (at least I think that’s what it is ;( – and I got it through a broker who is charging me a couple of basis points of the AUM. But, things are not going so well between him and. E ( I find him bossy, and know-it-all and he doesn’t answer my questions) so I would like to transfer to another broker. Is this an option and, if so, does it come at a cost or a lot of paper work? Thanks so much for any help/advice.

    Geoff

    Reply
    • January 03, 2013 at 6:23 am, 10X Investments said:

      Geoff,

      A couple of basis points (0.02%) would be nice, but brokers don’t come that cheap. A “couple of basis points” on a R1m investment amounts to R200; if that is the arrangement, then he may not feel sufficiently rewarded to offer ongoing advice. On the other hand, if he is charging you a couple of percentage points (2%), then you would be overpaying enormously.

      You are not bound to your broker, and you can change/work through another broker if you want. The paper work is minimal as your important relationship is with the investment manager. However, to the extent that your broker has received a commission from the service provider he has placed your money with (eg Allan Gray), there will be no claw-back of such commission. Usually, the advice fee is incorporated into the upfront sales commission. The problem with this is that if you change your broker, he or she will want to earn money off you, by switching your investments, so that they, too, can earn a commission. Ideally, you should pay your broker on a “time and skill” basis, and not tie the remuneration to the product sold. This fee can be recovered from your investment, but you would have to instruct Allan Gray accordingly.

      Reply
  218. December 19, 2012 at 7:31 am, Mel said:

    Why can my retirement annuity provider not provide me with a value projection?

    How can a provider not give you an estimate of what your RA/RF will pay out. I find that worrying. Took out a RF yesterday but could not be told an estimate of payout in 30 odd years time. Is this normal?

    Reply
    • December 20, 2012 at 10:20 am, 10X Investments said:

      Mel,

      Providers do make projections, but they are meaningless and usually flawed as they do not consider the asset mix or the fee impact. The reality is that the future is unknown, so future investment returns are unknown, and cannot be guaranteed.

      The gross investment return depends on you asset allocation (shares, bonds, cash) and on inflation. The long-term real (after-inflation) return from the various asset classes can be estimated, based on historical trends (around 6-7% for shares, 2% for bonds, 1% for cash); on that basis, incorporating your asset mix and deducting the fees you pay (critical!!), you can get a sense of what the real value of your investment may be in 30 years time.

      Inflation, on the other hand, is quite unpredictable, so any nominal (pre-inflation) estimate is quite worthless, for two reasons a) you don’t know the future inflation rate and you cannot predict it using any scientific method, b) the projected amount will be meaningless to you because you have no sense what this money will buy. Your investment may be worth R10m in 30 years, and that may sound like a lot, but 30 years ago R1m sounded like a lot, but in those days a tank of petrol cost R8, not R800.

      At 10X, we work on a real (after-inflation) return of 5% before fees (our fees are 1% pa or lower, others charge 3% or more) on a balanced portfolio (60% equity, 30% bonds, 10% cash). If you input these assumptions into Excel, apply the FV financial formula, together with your contribution and contribution period, you will have a sense of what your investment will be worth in 30 years, in today’s money.

      Reply
  219. December 18, 2012 at 6:47 am, Theresa Stolze said:

    Can I increase the value of my retirement fund once it matures?

    I have a retirement fund that matures in October 2013 — paying monthly contributions. I want to know if I can make cash payments into the fund so that I can increase the total value on the due date?

    Reply
    • December 20, 2012 at 10:12 am, 10X Investments said:

      Theresa,

      Fund rules permitting, you can contribute as much as you wish to your retirement fund. But for tax purposes, your deductions will be limited according to the present limits (eg for a retirement annuity fund it is 15% of non-pensionable income, for a pension fund 7.5% of your remuneration). The contributions that do not qualify for a tax deduction are returned to you tax-free at retirement (eg you can add them to your tax-free cash lump sum).

      The advantage of increasing your contributions at this late stage is a) to earn untaxed investment income within the fund and b) to lower the tax you pay in your final year at work, which works if your present marginal tax rate is high (eg at 40%) which means you are effectively claiming a deduction at a higher rate than the resultant proceeds will be taxed.

      Reply
  220. December 18, 2012 at 12:56 am, Peter said:

    How can I access the funds in my retirement annuities upon emigration?

    I am a Canadian living in Canada. From 1975-85 I resided in SA as a Permanent Resident and contributed to 3 RAs. I then stopped contributions and “emigrated” back to Canada. I am now over 65 and wish to receive as much as possible of the funds in my RAs (which have grown in Rands via investment since my departure and also diminished internationally considerably due to Rand devaluation). Their total value is approx R470,000. Is it possible to deplete the entire value via: A – a single lump sum withdrawal or B – must the lump sum be limited to a certain amount with the rest being withdrawn via an annuity (say 30% lump sum the annuity of 17.5% until depleted)? What taxation can I expect SARS to apply to A (if possible) and B above? Thank you.

    Reply
    • December 20, 2012 at 10:04 am, 10X Investments said:

      Peter,

      Provided you emigrated formally, you can claim the entire amount as a cash lump sum and have the (after-tax) amount transferred overseas. If you did not emigrate formally back in the Eighties, you can still approach SARS (our tax man) now, to formalise your emigration. Your proceeds will then be taxed as per our withdrawal lump sum tax table: the first R22,500 is not taxed, the balance to R470,000 will be taxed at 18%.

      Your alternative is ‘retire’ from the funds. You may then take one-third as a cash lump sum, which you will receive tax free (its less than R315,000), and which you can then transfer overseas. The balance must be commuted into an annuity (guaranteed or living annuity); the onus will then be on you to transfer these proceeds overseas periodically. For this second option, you will have to open a non-resident bank account – you can approach one of the local banks (eg Standard Bank of South Africa) who offer this kind of service. They may also be able to assist you with the emigration process.

      Reply
  221. December 17, 2012 at 5:20 pm, June Arnett said:

    Am I allowed to claim two tax-free lump sums from two different pension funds?

    I have two private pensions, of which one was from my previous employer and one with my present employer. The one now I have claimed my tax free cash two years ago. My previous pension also offers a tax free cash option in 2016. Am I allowed to claim two tax free sums from two different pots?

    Reply
    • December 20, 2012 at 7:21 am, 10X Investments said:

      June,

      SARS applies the aggregation principle on pretty much all retirement savings-related matters. In other words, it views your savings in totality, as one savings pot. This means that you only receive the tax-free cash lump sum allowances only once. If you previously cashed in your retirement fund, the first R22,500 would not have been taxed, the balance to R600,000 would be taxed at 18%, the balance to R900,000 at 27% and the remainder above R900,000 at 36%. If you now cash in your next retirement fund, SARS will not again grant you the allowances you already received. So if you, say, cashed in R500,000 previously, and you are now cashing in another R500,000, then the first R100,000 of that second amount will still be taxed at 18%, the next R300,000 will be taxed at 27% and the last R100,000 at 36%. Any future retirement funds you cash in will be taxed at 36%.

      Reply
  222. December 15, 2012 at 7:35 am, Harry said:

    When can I access my retirement annuity as a full lump sum?

    I am 57. I have a retirement annuity policy which I have had for 20+years which matures when I am 65. The current value is R220 000. Can I withdraw from this RA policy now, without emigrating, and bank the post tax proceeds?

    Reply
    • December 20, 2012 at 6:57 am, 10X Investments said:

      Harry,

      You can only access the retirement annuity as a full lump sum if:

      1. the amount is less than R7,000
      2. you formally emigrate and
      3. you retire early due to ill-health.

      None of these appear to apply in your case. You can retire from your RA seeing you are over 55, but you will be forced to buy an annuity with two-thirds of your proceeds.

      Reply
  223. December 11, 2012 at 8:30 am, Chris said:

    Defining non-pensionable income

    I belong to a pension fund, however only 60% of my income and 12.5% of the 60% of the income is used to calculate my contribution. Should I regard the other 40% of the income as non-pensionable income? Is there a tax benefit in this case?

    Reply
    • December 12, 2012 at 9:43 am, 10X Investments said:

      Chris,

      Yes, while the old laws still apply (before the harmonization changes come in in 2014), you can regard the remaining 40% of your income as non-pensionable income. You may deduct RA contributions up to 15% of non-pensionable income for tax purposes, so this only helps your tax affairs if you also contribute to an RA, otherwise there is no tax benefit.

      Reply
  224. December 07, 2012 at 5:35 pm, Kobus Palvie said:

    Living annuities

    I (as opposed to a fund) am the owner of a living annuity. Upon my death, the administrator of the LA has to wait for the determination of the lump sum tax before it can finally “wind up” the LA. The lump sum tax can only be determined once all beneficiaries have exercised their options. Potentially, by delaying exercising an option, a beneficiary can hold up the process, to the detriment of other beneficiaries. As the Pension Funds Act does not apply to member-owned LA’s, which parts of which other legal documents prohibit the process being delayed indefinitely?

    Reply
    • January 23, 2013 at 11:28 am, 10X Investments said:

      Kobus,

      The Income Tax Act is often a good reference point, especially the definitions in section 1. But the definition of a living annuity in section 1 does not specify the period within which a beneficiary must elect commutation. The ITA previously required in respect of retirement funds that such an option must be exercised within 6 months of date of death, but this requirement has since been deleted, which is why it may also be excluded in respect of living annuities. This could cause potential delays in the process.

      It is important to establish whether the LA is offered via a normal retirement fund or not. If it is offered via a retirement fund structure, then all the normal retirement fund principles for paying death benefits will apply. This means the benefit will be taxed in the hands of the member and in accordance with the retirement fund tax tables (as if the person retired one day before passing away) and the fund has 12 months to pay.

      But if the living annuity contract has been taken out by an individual with an insurer, then it is the policy of insurance that will determine the terms and conditions relating to the payment of benefits (some Sanlam products, for example, specify a limit for payment of death benefits of 6 months). So this may be your best starting point.

      Reply
  225. December 05, 2012 at 6:40 am, Gerard said:

    Under which circumstances can you mature an RA?

    I am 50 and do not work because of disablement. Can I mature my pure RA”S based on disability?

    Reply
    • December 05, 2012 at 11:07 am, 10X Investments said:

      Gerard,

      The law allows individuals to withdraw from their RA’s before age 55 if: a) the combined value of the RA is less than R7 000, b) emigration and c) early retirement due to ill-health. As regards the last-mentioned, poor health alone won’t be enough to justify your claim, you will have to show that you retired because you are unable to work. This will require medical proof, ie a written certification from a medical professional that you are permanently incapable, through infirmity of mind or body, of practising your occupation. The Board of Trustees of your RA must then approve your claim. To verify your claim, the Board may require you to undergo further medical examinations by a medical professional of their choosing (and at your cost).

      Reply
      • December 11, 2012 at 3:36 pm, Jayr said:

        Does “combined” refer to annuities from the same company?

        I have two retirement annuities with the same company. Both are paid up. For one the value is below R7 000. Why can the company not pay this out, like they were doing before 19 November? Does combined refer to annuities from the same company or does this not matter?

        Reply
        • December 12, 2012 at 9:40 am, 10X Investments said:

          Jayr,

          The aggregation principle applies, ie the administrator has to look at the total value of your RAs. If this is above R7 000, then he cannot pay out the balance on an individual RA, even if this falls below R7 000. Otherwise, It would be too easy to circumvent the law by simply splitting your contributions among a host of RAs.

          Reply
  226. December 04, 2012 at 3:24 pm, Trevor said:

    How does SARS decide on the tax amount for a directive?

    My father passed away, leaving his RA through Liberty to me. My question is: how does SARS decide on the tax amount for a directive? Is there a limit as to the amount that they are permitted to tax from an RA?

    Reply
    • December 05, 2012 at 11:00 am, 10X Investments said:

      Trevor,

      Retirement funds do not normally fall into the deceased’s estate – it is the trustees who decide who will receive the benefits of a retirement fund. However, if your father has no financial dependents and you were nominated in the nomination form, you will most likely receive the benefit.

      If you choose to receive a cash lump sum, the amount will be taxed as though your father had received this benefit the day before he passed. The amount would be taxed as a retirement benefit, ie the first R315,000 would not be taxed, the second R315 000 at 18%, the R315 000 at 27% and the balance above R945 000 at 36%. There is no limit. The aggregation principle applies, so if your late father has previously claimed a retirement or withdrawal lump sum benefit this would be considered by SARS in determining the lump sum tax now payable (in other words, these tax benefits cannot be claimed twice by the same person).

      If you choose to receive an annuity (monthly income), this will be taxed as income in your hands.

      Reply
  227. December 01, 2012 at 1:14 pm, Patsy Odendaal said:

    Why can’t the RA’s my husband has taken out for me and paid, since i have been a housewife for 75% of the 40 years that we have been married.

    Reply
    • December 03, 2012 at 10:29 am, 10X Investments said:

      Patsy,

      We are not sure what you are asking. You can pose your question in Afrikaans, if necessary.

      Reply
  228. November 29, 2012 at 10:48 am, Denise said:

    Can you borrow against your RA?

    I want to borrow against my long paid-up Sanlam Annuities, because I am in severe financial crisis and cannot get a loan.

    Reply
    • December 03, 2012 at 9:20 am, 10X Investments said:

      Denise,

      In terms of the Pension Funds Act, you are not permitted to borrow money from your RA fund. Nor may you cede the fund, or use the fund as security against a loan. The Regulators would like to use your RA fund for retirement funding purposes only.

      Reply
  229. November 27, 2012 at 3:15 pm, Leigh said:

    SARS adds the proceeds of all your RA’s together

    I am 65 and about to emigrate to Canada. I have a 27-year old RA with Momentum with a maturity value of R580 000. About 7 years ago my financial adviser sold me a second RA which matures in January and will stand at R110 000. I looked up the 2013 tax tables and see that the later RA will not only be completely consumed by tax in totality, but that I will even have to pay over and above that amount out of my first RA, as the total of the two RA’s is over the limited R600 000, subject to 18% only. I find it diabolical that I was advised to take out this RA for all those years. Not only do I get a zero return, but I also have to pay more tax than I would have on my initial RA, which would have fallen below the tax threshold. Is there anything I can do before it matures in January 2013, or can I appeal to SARS?

    Reply
    • November 28, 2012 at 4:04 pm, 10X Investments said:

      Leigh,

      The RA withdrawal tax table provides that the first R22 500 is not taxed, the balance to R600 000 is taxed at 18% and then balance to R900 000 at 27%. The aggregation principle applies, in calculating the tax, SARS adds the proceeds of all your RA’s together.

      So you will pay tax of R100 350 on the first RA (R580 000) and R27 900 on the second RA (R110 000). You would still pay the tax of R100 350 on the first RA even if you had not taken out the second RA, so your reasoning that the second RA is consumed by the tax on your first RA is quite flawed. Had you not taken out the second RA, your net proceeds would be R479 650. With the second RA your total proceeds will now be R561 750. So you are definitely not getting a zero return on your second RA. The RA system in SA is flawed, but it is not that flawed.

      The more critical question is: at what tax rate did you deduct your contributions? If your marginal tax rate (at which you deducted contributions) over the last seven years was below 27%, you may have grounds to feel aggrieved as you may have done better simply investing in a unit trust (although you have benefited from tax-free investment growth over the past seven years). Remember also, that if you no did not claim some, or all, contributions, these will be repaid to you tax-free.

      But no, you have no ground to appeal to SARS, and there is nothing you can do to change the tax law between now and 2013.

      Reply
  230. November 27, 2012 at 11:52 am, William Meintjies said:

    When can you lapse or cancel a retirement annuity?

    Good day

    Am I allowed to lapse or cancel a retirement annuity if the value is less than R250?

    Kind regards
    William

    Reply
    • November 27, 2012 at 1:43 pm, 10X Investments said:

      William,

      You can withdraw from a RA if the paid-up value is less than R7 000.

      Reply
  231. November 27, 2012 at 10:39 am, Carla said:

    Do you pay tax upon withdrawing your RA?

    Hi,

    Will there be tax payable if I withdraw my RA from Liberty to put into my Allan Gray unit trust account?

    Thanks!

    Reply
    • November 27, 2012 at 1:36 pm, 10X Investments said:

      Carla,

      You cannot withdraw from your RA unless 1) the balance is less than R7 000, b) you are formally emigrating or c) you are retiring early due to ill-health. In these instances, you will pay withdrawal lump sum tax on the proceeds, and you can then reinvest the balance as you wish.

      Failing this, your options are to a) make your Liberty RA paid-up and redirect your contributions to an Allan Gray unit trust account or b) transfer from the Liberty RA to an Allan Gray RA. You will not pay tax in either of these two scenarios but you may incur an early termination charge from Liberty.

      Reply
  232. November 26, 2012 at 7:09 pm, John said:

    Providing for beneficiaries

    My parents left South Africa without formally emigrating. My mother is the sole beneficiary under my father’s investments and preservation fund in South Africa, should anything happen to him. Unfortunately when they left South Africa, my mother’s savings account was closed. They are now concerned that should something happen to my father, my mother has no bank account in SA for the funds to be paid into. They have tried to open a bank account with the bank where my father has an account or convert it to a joint account, but the bank will not allow this without my mother physically going to South Africa to sign the paperwork. Do you have any recommendation as to what she can do to have an account available for funds to be paid into should anything happen to my father?

    Reply
    • November 28, 2012 at 2:21 pm, 10X Investments said:

      John,

      This appears to be a banking problem, so one of the local banks with a non-resident banking department should be able to help you. But as potential alternative solution, your parents should go through the formal emigration process now – this would permit the trustees of the preservation to pay out the proceeds into an overseas bank account. Also – and this is just in per the Financial Services Law General Amendment Bill of 2012 – a fund may now make payment into a third party bank account where a beneficiary proves they cannot open a bank account. So the fund could potentially use your bank account to effect the payment.

      Be aware though that it is the trustees (not your father) who decide who gets the proceeds of the preservation fund. Your father can nominate beneficiaries, but trustees are not bound by that – they first have to ensure that all financial dependents are provided for (although most likely this will only be your mother in this case).

      Reply
  233. November 26, 2012 at 2:20 pm, Diana said:

    Can you make a lump sum contribution to an RA?

    Hi,
    I currently contribute to an RA on a monthly basis (increasing annually at the inflation rate). It is a high equity investment – opened 15 years ago. I would like to make a lump sum contribution to this RA, but have been advised that I would then have to make the RA sec28 compliant and to rather open another RA. Is this true?

    Reply
    • November 27, 2012 at 1:31 pm, 10X Investments said:

      Diana,

      RA contracts entered into before 1 April 2011 are exempt from the revised Reg 28 in terms of the grandfathering clause. The Memo to the Reg states that “It is therefore emphasised that no additional policies that are not Regulation 28 compliant should be sold, as irrespective of any contractual arrangement entered into these will be required to be compliant as at 31 July 2011. Industry participants are also warned against exploiting the grandfathering provisions to evade Regulation 28 – behaviour will be monitored and the grandfathering provisions will be removed should abuses be observed.”

      Per our reading, making a lump sum (top up) contribution is a normal industry practice (even encouraged by National Treasury) and does not amount to “abuse”. It should therefore not invalidate the grandfathering clause. On the other hand, starting a new RA will definitely subject the new funds to Reg 28 (and, of course, earn your broker more commission). Of course, if the lump sum contribution amounts to much more than a top-up contribution, and appears to be well above historical norms, or excessive relative to your current savings balance, then the Regulator may well take a different view regarding your intentions, and invalidate the grandfathering clause.

      Reply
  234. November 22, 2012 at 9:10 am, Sindi said:

    How your retirement death benefit gets taxed

    How is a retirement death benefit taxed if you want it to be transferred to your overseas bank account? I am a South African citizen who resides in eastern Europe. My mother passed on this year while on service and her retirement death benefit was awarded to me. I have elected to take it in a cash lump sum after tax. So is this cash lump sum going to be taxed again if it is transferred to my overseas account?

    Reply
    • November 22, 2012 at 12:31 pm, 10X Investments said:

      Sindi,

      The retirement benefit will be taxed as though it had been received by your mother as a retirement benefit the day before she passed. You will receive the net amount (ie no more tax is deducted), which you can the transfer to your overseas bank account as part of your overseas investment allowance. You should get in contact with the administrator, to see if they are willing to transfer the benefit directly into your overseas bank account, although in terms of our foreign exchange control, you may have to involve a local bank (possibly by opening a non-resident bank account here, if you no longer have a local bank account).

      Reply
  235. November 21, 2012 at 1:46 pm, Zoltan said:

    What happens to your RA when you emigrate?

    If I leave South Africa, what happens to my RA?

    Reply
    • November 21, 2012 at 2:46 pm, 10X Investments said:

      Zoltan,

      That’s up to you. You can choose to emigrate formally (sign off with SARS), in which case you can apply to have your RA paid out. Or you can make it paid up, and leave it here until a later date, at which point you can again apply to have it paid out (after proving formal emigration), or you can convert it into an annuity which will have be paid into a SA bank account (and for which you may have to open a non-resident bank account). Or you can keep contributing until maturity date, at which point you will have the same options as just mentioned.

      We have answered numerous questions on this topic; we encourage you to scroll down the FAQS page, to find out more on the subject regarding bank account requirements, tax consequences, procedural matters etc.

      Reply
  236. November 21, 2012 at 11:59 am, Marven Kolobe said:

    How long does it take for your retirement fund to be payed out?

    I have resigned from a company and I need to know how long it takes for the funds to be processed and how I can find out how much the capital is.

    Reply
    • November 21, 2012 at 1:10 pm, 10X Investments said:

      Marven,

      The length of time taken to process your claim depends on the efficiency of your administrator, whether you have submitted all required documentation on time and whether your tax affairs are in order. If all is well, then it will likely take between 14 and 21 business days to pay you out. If it is taking longer, contact the administrator to find out why there is a hold-up. They may be missing some information. The amount you will receive depends on the balance in your account at the time you are disinvested and the tax that has to be deducted. You should have an idea of the gross capital balance by referring to the latest statement sent by your administrator, or by requesting a statement from them.

      Reply
  237. November 20, 2012 at 9:06 pm, Nico said:

    Why can’t you make a loan against an annuity?

    My broker told me that I can’t make a loan against my Sanlam Glasier Annuity. Why?

    Reply
    • November 21, 2012 at 11:06 am, 10X Investments said:

      Nico,

      It is not allowed in terms of the Pension Funds Act.

      Reply
  238. November 20, 2012 at 10:57 am, Megan said:

    Can you terminate your retirement annuity?

    Will my premiums be repayed when I terminate the annuity?

    Reply
    • November 21, 2012 at 9:47 am, 10X Investments said:

      Megan,

      You cannot really terminate your annuity, you can only make your RA paid up. In doing so, you may incur a early termination charge or penalty, which can be as high as 30% of your accumulated savings. If the balance is below R7 000 (net of any early termination charges), that amount will be paid out to you. If not, your savings will remain in your RA account and you may only access them when you turn 55. The amount you will receive then is the value of your contributions, plus the net (after fee) investment return earned on those contributions over the investment term. These returns can be positive or negative, ie you may receive more or less than the value of your contributions. As a long-term investors you should receive considerably more than your contributions, although many RA providers will “misappropriate” a big chunk of your investment return by charging you high fees.

      Reply
  239. November 19, 2012 at 8:24 pm, Scott Robinson said:

    Can you have the proceeds of your RA paid out over 5 years to a third party?

    I have an RA with Old Mutual worth approx. R120 000. Can I have the proceeds paid out over 5 years to a third party in South Africa? I emigrated 25 years ago.

    Reply
    • November 21, 2012 at 9:38 am, 10X Investments said:

      Scott,

      You cannot cede or dispose of your RA in this manner – this is specifically prohibited by the Pension Funds Act. Rather, you must receive the proceeds in your name, pay the relevant tax, if any, and thereafter you can allocate the money as you deem appropriate. Also, you cannot use your gross RA proceeds to purchase a fixed term annuity. If you have formally emigrated, you can apply to have the full RA paid out as a lump sum, net of lump sum tax, after proving your emigration. You can then use the net proceeds to purchase a fixed term annuity. Alternatively, you can use the RA proceeds (before tax) to purchase a living or conventional annuity in South Africa, which will then be paid out into your non-resident bank account. The conventional annuity is a life-time annuity, ie it will pay out very little every month; the living annuity allows you to draw down at a maximum rate of 17.5% pa, which may be more suitable for your needs.

      Reply
  240. November 19, 2012 at 8:20 pm, Felicity Espley-Jones said:

    Which forms to complete to have your RA paid into your blocked rand account

    I legally emigrated from the RSA 20 years ago and have an Old Mutual RA maturing next year. Which Old Mutual forms do I have to complete to access the annuity and have it paid into my blocked rand account?
    Thanks

    Reply
    • November 21, 2012 at 9:33 am, 10X Investments said:

      Felicity,

      Old Mutual should be able to tell what forms you will need to submit. Typically, they will require a notification of withdrawal form, proof of identity and proof of your banking details.

      As you have formally emigrated, you may consider withdrawing (rather than retiring) from the RA and transferring the full amount (net of tax) overseas. In that case, you will also have to submit proof of your emigration, so that SARS can issue the relevant tax directive.

      You will then need to discuss with Old Mutual as to how the amount should be paid (ie into a non-resident bank account in SA, or your blocked rand account, or directly into your overseas bank account). Alternatively, you can opt to convert your RA into a SA annuity. The monthly/quarterly proceeds will then be paid into your non-resident/blocked rand account and the onus will then be on you to have these amounts transferred overseas periodically.

      Reply
  241. November 18, 2012 at 11:04 am, Ken da Silva said:

    Early RA withdrawal due to ill-health

    Good day,

    My name is Ken da Silva.

    I have three retirement annuities and am turning 51 in February. I have been diagnosed with severe Bipolar and am unable to work. In fact, I am almost destitute and living with my elderly parents who are also struggling. I have substantial paid up values in my three annuities (some R480 000 worth). You state that a member can claim their benefit from the age of 55 (unless they are in ill health, in which case you may claim earlier)?
    Please would you be kind enough to answer me here, on my query, since I am desperate.

    Many thanks.

    Kind regards,
    Ken

    Reply
    • November 21, 2012 at 9:24 am, 10X Investments said:

      Ken,

      The law allows individuals to withdraw from their RAs before age 55 if: a) the combined value of the RA is less than R7 000, b) emigration and c) early retirement due to ill-health. As regards the last-mentioned, poor health alone won’t be enough to justify your claim, you will have to show that you retired because you are unable to work. This will require medical proof, ie a written certification from a medical professional that you are permanently incapable, through infirmity of mind or body, of practicing your occupation. The Board of Trustees of your RA must then approve your claim. To verify your claim, the Board may require you to undergo further medical examinations by a medical professional of their choosing (and at your cost).

      Reply
  242. November 16, 2012 at 9:52 am, Robbie said:

    Switching your portfolio

    I have an annuity with Old Mutual with a current value of R75 416. I have been declared insolvent and obviously would like to take the full portion as a lump sum. Can I change the investment portfolios to incur costs now so that the value might drop to beneath R75 000 when I turn 55 in March 2013?

    Reply
    • November 19, 2012 at 4:58 pm, 10X Investments said:

      Robbie,

      We cannot advise you on any action to help you avoid the provisions of the Income Tax Act. Switching your portfolio may indeed result in some fees that could push your RA value below R75 000 but this may then be offset by positive market movements. Alternatively, you could do nothing and negative market movements could see your RA balance drop below R75 000. All these moves are speculative – the reality is that at this late point there is nothing you can do that will guarantee the outcome you seek.

      Reply
  243. November 15, 2012 at 10:25 pm, Catherine said:

    The tax treatment of a lump sum benefit payable by a RA subsequent to a member’s emigration

    My husband and I have provident funds in SA. We live in the UK and are considering cashing in and transferring the money to the UK. We have been told that the provider can only pay out into a South African bank account, however we closed these accounts a while back. On reading some questions on your website it seems the solutions is to declare yourself formally emigrated and once we have clearance certificates then it is possible to pay money into a UK bank account. Is this correct? I understand policies will be subject to early termination fees and tax.

    Reply
    • November 21, 2012 at 9:15 am, 10X Investments said:

      Catherine,

      This is a topic of some confusion and we have obtained some direct input from SARS on this matter (albeit relating to an RA fund, not to a provident fund). However, their answer was not as clear as it could have been.

      The situation is slightly different with a provident (or provident preservation fund as we suspect it would have to be), as you are allowed to cash in 100% of the accrued benefit (ie there is no requirements to buy an annuity with two-thirds of the proceeds).

      However, the administrator must obtain a tax directive (instructing the amount of tax to be deducted) before paying out the balance. This may be problematic if you left without saying goodbye, and SARS has not received any returns from you for the past few years. So yes, emigrating formally, and tidying up your affairs with SARS will probably be necessary before you can access your provident funds.

      However, once this is sorted, you should be able to organise with the administrator to have the proceeds remitted directly to an offshore bank account. Alternatively, if they refuse, you would have to go the indirect route, ie first open a non-resident bank account and channel the proceeds through there.

      There should be no termination penalty (those typically relate to early withdrawals from retirement annuity funds). On emigration, your provident fund proceeds will pay taxed per the withdrawal rather than retirement lump sum tax tables, which are slightly more onerous – you will pay R59 400 more in tax on the first R945 000, thereafter there is no difference. However, according to SARS, your tax status in the UK also comes into play

      Below is the formal answer we received from SARS:

      SARS view on the tax treatment of a lump sum benefit payable by a retirement annuity fund subsequent to a member’s emigration.

      “Please note that our approach on the issue is premised on and based on our assumption that the matter relates to the circumstances where the payment of a retirement fund lump sum withdrawal benefit is triggered by a member’s emigration as alluded to in paragraph (b)(x)(dd) of the definition of retirement annuity fund in section 1 of the Income Tax Act.

      1. Would such a person need to open up a non-resident bank account or can the amount be paid into an offshore bank account?
      After applying for a tax deduction directive as required in terms of paragraph 2(1) and 9(3) of the Fourth Schedule to the Income Tax, payment of the balance after tax remains the prerogative and arrangements agreed to by both parties (the member and the administrator of the fund concerned)

      2. If a non-resident bank account, can the amount be sent offshore on request to the bank?
      Our response is the same as in item 1 above.

      3. Would they still need to go through the emigration process with SARS? What would be the tax consequences of this?
      Yes – emigration must be recognized by the South African Reserve Bank for purposes of exchange control;

      4. Do they qualify for withdrawal cash lump sum tax breaks on the RA or how would they be taxed?
      If payment is triggered by reason of a member’s emigration, the relevant payment is regarded as retirement fund lump sum withdrawal benefit and subject to tax in terms of paragraph 2(1)(b)(ii) of the Second Schedule to the Act; and

      5. Do they need to convert two-thirds into an annuity, or can they claim the full amount as a cash lump sum?
      The full amount is regarded as a retirement fund lump sum withdrawal benefit.

      Central to the payment of a lump sum or an annuity, is the DTA between the UK and South Africa used as a source of reference in determining taxing rights. In South Africa, the tax residence test (not a member’s citizenship) is applied in determining taxing rights. The taxing rights will be determined first by taking into account/consideration of our domestic tax law as incorporated in our Income Tax Act. In addition, the crux of the matter is whether the taxpayer is able to produce a tax residence certificate from the UK Revenue Authority.

      To enable SARS to express an informed view on this matter, they require the following information:
      1. The taxpayer’s particulars including her ID and income tax number;
      2. Name of the retirement annuity fund;
      3. If approved, the SARS approval number(18/20/4…….) of the fund;
      4. Tax residency certificate from the UK Revenue Authority; and
      5. The request for our views must be substantiated by all the necessary set of facts and circumstances.

      Reply
  244. November 15, 2012 at 8:30 am, Andrew Bennion said:

    When you’re allowed to cash in your RA/preservation funds before retirement

    I am emigrating to the United Kingdom. I have 4 policies invested in Liberty as well as Discover Invest Preservation Funds totaling R 539 000. I want to formally emigrate with SARS and the Reserve Bank and want to know if I may transfer the total abroad. Note: I have exercised one withdrawal on these policies. Please advise soonest. Thanks, Andrew

    Reply
    • November 15, 2012 at 10:38 am, 10X Investments said:

      Andrew,

      Once you have formally emigrated (signed off with SARS), you must present your tax clearance certificate and you will then be allowed to cash in your RA/preservation funds. (Provided you have not accessed your preservation fund before, you are in any event allowed one full or partial withdrawal before your officially retire, without SARS approval). You will pay withdrawal lump sum tax on the proceeds (deducted by the administrators), the balance you may take offshore as past of your once-off family allowance (R8m), or as part of your annual investment allowance (R4m).

      Reply
      • November 15, 2012 at 11:29 am, Andrew Bennion said:

        One further full or partial withdrawal from your preservation fund before retirement

        Thank you for your valued prompt response. I just want to clear up a bit of confusion on my side. I need clarity as follows:

        I worked for a large corporate and contributed monthly to the company’s pension fund. I then resigned from this company and took employment with another. Upon my resignation from the company I was leaving, I made a withdrawal before investing the balance thereof in a preservation fund. Can I make another or full withdrawal now from the preservation fund? Because I made a withdrawal from the money being transferred from my pension fund to the preservation fund, I understand that I may now draw the full amount from my preservation fund even though I am 48 and not 55.

        Reply
        • November 15, 2012 at 1:11 pm, 10X Investments said:

          Andrew,

          Yes, even though you did not preserve your entire retirement fund, you still are allowed one further full or partial withdrawal from your preservation fund before retirement. This is permitted not because you made a partial withdrawal prior to preservation, but despite of that.

          Reply
  245. November 14, 2012 at 11:42 am, Manesh said:

    Fully utilise your possible tax deduction

    Hi. I have been contributing monthly to an RA with PPS, but it is below the tax threshold. Is it more cost effective to add money as a lump sum to the maximum tax benefit or open a new RA with the lump sum addition? My broker claims that both options will incur the same costs. Thanks

    Reply
    • November 14, 2012 at 12:33 pm, 10X Investments said:

      Manesh,

      What do you mean, your contribution is below the tax threshold? Are you saying you are not fully utilising your possible tax deduction? In that case you can make up the shortfall through an annual lump sum/top-up payment. We would however advise against opening up another RA for this purpose as you will likely duplicate some (admin-related) costs.

      Reply
  246. November 14, 2012 at 8:33 am, Magda said:

    Can you apply for an RA when working abroad?

    Hi. I’m 25 and thinking of planning ahead for my old days. The only problem is that I’m leaving in 2 months to go in work in West Africa. Can I still apply for a retirement annuity?

    Reply
    • November 14, 2012 at 11:31 am, 10X Investments said:

      Magda,

      Yes, you can apply for a RA. However, as you will be working (and presumably paying tax) in West Africa, you may not receive a tax deduction on your contributions during this time (although at retirement such contributions are added to your tax-free lump sum). Obviously, you also need to leave/remit sufficient funds to pay your contributions.

      Reply
  247. November 08, 2012 at 11:55 am, Boitumelo Moeng said:

    Can you convert your RA into a provident fund?

    I started a retirement annuity with Amadwala and was told that I can not withdraw the funds because the value is over R7 000, which was never communicated to me in the first place. Now that I have resigned and want to carry on contributing towards my RA, I would like to rather convert it to provident fund – would that be possible? Can I please get feedback.

    Reply
    • November 08, 2012 at 1:39 pm, 10X Investments said:

      Boitumelo,

      You are only permitted to withdraw from your RA if a) the paid-up RA value is less than R7 000 b) you are over 55 c) you are formally emigrating or d) you have retired early due to ill-health. You can only transfer from one RA to another. Hence, you will not be able to transfer your RA to a provident fund.

      Reply
  248. November 07, 2012 at 11:09 pm, Alain Cominotto said:

    Blocker and accounts – a thing of the past

    Hello,

    I am emigrating and was told by Absa that they they need a blocked rand account before they can pay my RA over, but I read one of your posts that you don’t need one. Is the person at Absa maybe misinformed?

    Kind regards,
    Alain

    Reply
    • November 14, 2012 at 11:21 am, 10X Investments said:

      Alain,

      It seems that way – blocker and accounts are essentially a thing of the past. On applying for formal emigration, you can cash in your RA and take out the proceeds as part of your family allowance, or your investment allowance.

      Reply
  249. November 06, 2012 at 7:21 pm, Fabian said:

    Contributions to an RA can only receive tax-relief in the name of the member of the RA

    Can I expect to claim money from SARS if I am the person who pays her retirement annuity? Please assist me!
    Kind regards
    Fabian Moffit

    Reply
    • November 08, 2012 at 10:01 am, 10X Investments said:

      Fabian,

      Contributions to a Retirement Annuity fund can only receive tax-relief in the name of the member of the Retirement Annuity fund. Hence, if you pay your spouse’s RA contributions, she can claim tax deductions against her income. You will not be able to claim tax deductions against your income, if the Retirement Annuity is not in your name.

      Reply
  250. November 06, 2012 at 7:24 am, SS said:

    Annual increases to your RA contributions

    I am 53 years old. My broker tells me that Sanlam has just informed him that they will no longer be increasing my retirement annuity annually. He provides alternatives to increase.
    How can Sanlam do that without my consent?

    Reply
    • November 14, 2012 at 11:19 am, 10X Investments said:

      SS,

      Annual increases to your RA contributions are laid down in your policy and Sanlam is bound by that. But perhaps you have reached the end of your contract term (ie no more automatic increases). You should follow up with Sanlam directly, rather than with your broker, to find out exactly what is going on.

      Reply
  251. November 05, 2012 at 9:45 am, Nicola said:

    What happens to your RA in the case of divorce?

    If I took out an RA and had nominated beneficiaries, what would happen to this RA if I got divorced (married ANC)? Would my RA go to my nominated beneficiaries and be protected from my ex?

    Reply
    • November 14, 2012 at 11:17 am, 10X Investments said:

      Nicola,

      The RA will be subject to the divorce agreement. Typically, if your ANC is with accrual, the RA will be considered in determining the size of the accrual (increase in the value of your assets), but this does not mean your husband has an automatic claim on part of your RA. It may merely offset part of the claim you have against him.

      The issue of nominated beneficiaries is not really relevant here, as they only come into play in the event of your passing while still a member of the fund. In that case, the fund trustees will decide who should get your RA proceeds (essentially your financial dependents; only if you have none, will the trustees consider your nominated beneficiaries). Of course, the trustees may consider your husband a financial dependent, although once you are divorced, this is unlikely.

      Reply
  252. November 02, 2012 at 6:37 pm, NaNandi said:

    How many times can you claim the tax-free portion of R315 000?

    If one takes takes a voluntary retrenchment and there is money invested in both a pension and a provident fund, R315K is the tax free portion of both amounts, correct? And can the R315K be paid out in one go even if there is still paperwork for the balance to be transferred into another fund, or must the tax directive be done on the entire amount first and only then can the R315K be paid out?
    How does this change if half of the R315K has already been paid out, which was the full pension fund contribution and now the balance of the R315K which is part of the total provident fund contribution which is being held back? Is this correct or can one ask for the balance of the R315K to be paid out?

    Reply
    • November 14, 2012 at 11:10 am, 10X Investments said:

      NaNandi,

      You can claim the tax-free portion of R315 000 only once, not once per pension and per provident fund. At retrenchment, you must instruct the administrator what to do with your retirement savings (how much you want to cash in, how much you want to transfer and where). The administrator will obtain a tax directive for each requested payment (ie one for the pension fund, then one for the provident fund). If you receive part of the R315 000 previously, you can still ask for the balance to be paid out.

      Reply
  253. October 31, 2012 at 9:27 pm, Charmaine said:

    Can you withdraw the funds in your RA upon formal emigration?

    I have a retirement annuity with Old Mutual. I have emigrated to Canada and no longer reside in South Africa. Can I transfer or withdraw the monies in my RA?

    Reply
    • November 08, 2012 at 9:41 am, 10X Investments said:

      Charmaine,

      If you have formally emigrated from South Africa (ie signed off with SARS), then you will be able to cash in your RA now. You will pay withdrawal lump sum tax on your RA, and SARS will levy any capital gains tax on your other assets (if applicable). You may also incur a termination charge from your RA provider if you cash in early.

      If you leave the RA to mature and/or you don’t formally emigrate, you will be compelled to buy an annuity with two-thirds of your savings, and you will then have to transfer the proceeds monthly, or annually to Canada. This will be an expensive administrative hassle, as you will have to apply for each transfer separately. You will also assume exchange-rate risk.

      Reply
  254. October 30, 2012 at 5:57 pm, Shaun said:

    Can you transfer a paid up RA to an active RA?

    Can one move money from a paid up retirement annuity to a currently active one? I have a paid up policy with a value of R10 497 and would like to transfer it to an active annuity – is this possible?

    Reply
    • November 08, 2012 at 9:37 am, 10X Investments said:

      Shaun,

      You should be able to transfer from a paid-up retirement annuity to an active one. Some companies will have a minimum transfer amount, so you will need to check whether your R 10 497 is above the minimum.

      Reply
  255. October 30, 2012 at 5:06 pm, Harold said:

    RA funds must be taken out as part of your allowance

    Hi,
    One final question. If I transfer the funds (after tax) from my RA policy overseas when I emigrate, will these funds have to be included in the R8m allowance per family unit or will they be in addition to this?
    Regards,
    Harold

    Reply
    • November 14, 2012 at 10:47 am, 10X Investments said:

      Harold,

      The RA funds must be taken out as part of your R8m allowance.

      Reply
  256. October 29, 2012 at 3:04 pm, Harold Campbell said:

    How will your RA funds be taxed when moving it overseas?

    I have a Sanlam PPS policy currently “worth” R1,3m. The initial policy was started 22 years ago. 3 years ago I had all these funds put into another Sanlam PPS policy and increased the monthly payments. In both instances the policy was to mature on 01.07.2016 when I will be 61yrs old. For various reasons I am to retire in 2013, at age 57/8, and would like to know if I can transfer the funds from this policy overseas and, if so, how will it be taxed and are there penalties from Sanlam? Or if I simply made it paid up, would there be penalties and would I be able to buy a living or guaranteed annuity now without waiting till I am 61?
    Thanking you

    Reply
    • October 30, 2012 at 11:44 am, 10X Investments said:

      Harold,

      As you are over 55 you can withdraw from the RA now (or make it paid up), and use the proceeds to buy a living or guaranteed annuity (now at a future date). Policies typically mature at 55, although investors can choose to keep the policies going thereafter. The fact that you have instead contractually agreed to transfer the proceeds to another RA and increase contributions means that a) your broker may have made even more money off of you and b) you may incur a termination penalty. Given the short contract term, this should not be significant however.

      Note that you will have to buy the annuity in SA and organise to transfer the proceeds monthly or annually overseas if you do emigrate. This is a hassle and expensive, as you must organise each transfer individually. To take your money overseas with you in one go, you must formally emigrate (sign off with SARS), the entire proceeds will be then taxed per the withdrawal lump sum tax table, ie the first R22 500 is not taxed, the balance to R600 000 at 18%, the balance to R900 000 at 27% and the remainder at 36%.

      Reply
  257. October 29, 2012 at 7:47 am, Mark Houseman said:

    Should you cash in your RA when emigrating or wait until it matures?

    I live in Australia and will be taking Australian citizenship but will keep my South African citizenship. Do I emigrate and cash in the ZAR360k RA with Old Mutual or wait until 2017 when it matures?

    Reply
    • October 29, 2012 at 5:09 pm, 10X Investments said:

      Mark,

      To cash in your RA now, you need to formally emigrate, ie sign off with SARS. You will pay withdrawal lump sum tax on your RA, and SARS will levy any capital gains tax on your other assets (if applicable). You may also incur a termination charge from your RA provider if you cash in early.

      If you leave the RA to mature and you don’t formally emigrate, you will be compelled to buy an annuity with two-thirds of your savings, and you will then have to transfer the proceeds monthly, or annually to Australia. This will be an expensive administrative hassle, as you will have to apply for each transfer separately. You will also assume exchange-rate risk.

      The first option sounds more pragmatic.

      Reply
  258. October 29, 2012 at 12:47 am, Mev Claudia Gouws said:

    Where can you get a tax certificate for your RA contributions?

    SA uittredingannuiteitesfonds kliente nommer: 064934608. Waar kan ek ‘n belastingsertifikaat vir my bydraes vir die belastingjaar geeindig Feb 2012 kry? U hulp sal hoog op prys gestel word. Dankie

    Reply
    • October 29, 2012 at 5:05 pm, 10X Investments said:

      Claudia,

      You need to request this certificate from the administrator of your RA.

      Reply
  259. October 26, 2012 at 12:56 pm, Samantha said:

    Can your employer compel you to invest in an RA?

    Hi

    Our company has been bought off by another; the employees are to be moved over to the other company but remain under our current contracts. We were told that we could move our
    money to a preservation fund, but now they say that we can’t and that we have to move it to an RA. Is this the law? I do not want to move my money to an RA. Thanks

    Reply
    • October 29, 2012 at 9:20 am, 10X Investments said:

      Samantha,

      No, this is not the law. Your employer cannot compel you to invest in a RA (even if the fund rules specify this). You are fully entitled to either transfer your savings tax free to your new employer’s retirement fund (unless you are presently in a pension fund and your new employer offers a provident fund); alternatively you must be given the option to preserve your savings in a preservation fund of your choosing. RA’s are more restrictive than either a provident/pension fund or a preservation fund, as the RA locks up your money until you are 55. This may well be in your best interests, but your employer cannot impose this restriction on you.

      Note however that if you are presently in a Group RA scheme (rather than a pension or provident fund), then you will have to remain in that RA. The reason is that the contract is between you and the RA provider, and this does not change if you transfer to another employer.

      Reply
  260. October 25, 2012 at 12:02 pm, Mokgatle Victoria said:

    How to access your RA tax certificate in the case that you forget your password

    I need to open my RA tax certificate but do not remember my password. Please help

    Reply
    • October 26, 2012 at 11:10 am, 10X Investments said:

      Mokgatle,

      If you go the Log-in page for the Administration & Reporting Portal, you will find a Live Chat function. Please click on the green section, and someone at 10X will “pick up”, verify your identity and send you your log-in details. Alternatively, if you know you user name, and you have only forgotten your password, you can also use the “forgotten your password” function on the same page, to have your password sent to your email address.

      Reply
  261. October 24, 2012 at 4:21 pm, Tiana Pahlad said:

    Retirement annuity rules

    Has this R7 000 rule always been in place?

    Reply
    • October 25, 2012 at 12:53 pm, 10X Investments said:

      Tiana,

      No, not always, but for some years now. We are not sure of the exact date it was introduced. This limit appears quite outdated, and has been overtaken by inflation.

      Reply
  262. October 24, 2012 at 2:17 pm, Mrvyn said:

    Under what circumstances can you cash in a RA policy before the due date?

    Can I cash an RA policy before the due date?

    Reply
    • October 25, 2012 at 9:03 am, 10X Investments said:

      Mervyn,

      You are only permitted to withdraw (cash in) your RA if 1) the paid-up RA value is less than R7 000 b) you are formally emigrating or c) you have retired early due to ill-health. Otherwise, you can only retire from your annuity. You may then cash-in one-third of your investment, the balance must be used to purchase an annuity. You can only retire from your RA once you have reached the age off 55.

      Reply
  263. October 24, 2012 at 12:40 pm, Vinotha Moodley said:

    Can you withdraw part of your RA before retirement?

    Can I withdraw part of the funds from my Sanlam Retirement Annuity? I am now 50 years old and I have been contributing since 1984.

    Reply
    • October 24, 2012 at 1:49 pm, 10X Investments said:

      Vinotha,

      We compliment you on your savings diligence! Few people can claim to have contributed 28 years to an RA, or to have started so young. Nevertheless, you will have be patient for another five years as you are only permitted to withdraw from your RA if 1) the paid-up RA value is less than R7 000 2) you are over 55, c) you are formally emigrating or d) you have retired early due to ill-health.

      Reply
  264. October 23, 2012 at 7:33 pm, Cedrick Moodley said:

    Can you withdraw from an RA that is paid up?

    I have a Sanlam RA which is paid up. I recently started my own business and am experiencing financial difficulties. Based on this, can I take a loan against or withdraw from
    RA?

    Reply
    • October 24, 2012 at 10:22 am, 10X Investments said:

      Cedrick,

      You are only permitted to withdraw from your RA if 1) the paid-up RA value is less than R7 000 2) you are over 55, c) you are formally emigrating or d) you have retired early due to ill-health. Further, our pension fund law does not permit you to take a loan from or against your RA. In other words, you will not be able to use your RA savings to resolve your present financial difficulties.

      Reply
  265. October 22, 2012 at 1:58 pm, Valerie said:

    What to do about your RA when emigrating

    I have an Old Mutual RA and I would just like to know if I can cash it in if it is paid up as I am emigrating. They did tell me a long story about tax clearance, blocked rand accounts, etc… However, is it not possible to rather cash it in? I don’t want to go through the laborious process of formally emigrating. Please help.

    P.S. My tax returns are up to date.

    Reply
    • October 23, 2012 at 11:46 am, 10X Investments said:

      Valerie,

      You can only access your paid-up RA savings if a) the amount is below R7 000 b) you are 55 or older c) you have retired early due to ill-health and d) you are formally emigration.

      Formal emigration requires sign-of with SARS. SARS ensure that your tax affairs are in order, levies any outstanding CGT (other than on property you leave behind) and then issues you a clearance certificate that enables you to cash in your RA. It is hardly a laborious process, and there are no blocked rand accounts to deal with you any more – you can take your savings with you in terms of your foreign investment allowance.

      Your other option is to leave your savings behind, but extracting your savings once you are no longer a resident, now that is truly laborious. We would not recommend it.

      Reply
  266. October 22, 2012 at 10:18 am, Dawid said:

    Saving through a work place retirement fund is preferable to saving through an RA

    My pension fund grows annually at about 13% (worth R380 000) and my RA at about 10% (worth R71 000). Would it be wise to make my RA paid up and rather use the R885 monthly RA contribution as additional amounts to my pension fund?

    Reply
    • October 23, 2012 at 11:36 am, 10X Investments said:

      Dawid,

      As a general rule, saving through a work place retirement fund is preferable to saving through an RA, as it is more efficient. However, in making this decision, you need to consider other relevant factors. Why is your RA earning a lower return than your pension fund? This may be due higher fees, a different asset allocation, a different investment style, or just poor performance.

      RA’s (especially life company RA’s) are typically far more expensive than a workplace pension fund. This difference can be as much as 2% per pa. That has a big impact on your long-term investment performance. A high fee differential may be a good reason to switch into the lower cost fund

      Or you may have higher investment risk (higher equity allocation) in your pension fund than in your RA – typically this will reward you with a higher return over the longer term, albeit with more intermittent volatility. Given your age and likely investment term to retirement, how much investment risk is appropriate for you? If you are still young, you can afford to be in a high risk portfolio.

      Where is your RA money invested? Your pension fund may have more exposure to market sectors that have done well in recent years (eg SA Industrials, Property) than your RA. This type of outperformance may be down to a combination of both skill and luck, and it may not last.

      You should also compare investment styles, and whether a particular style just happened to be successful over your reference period. For example, value investing has underperformed in recent times, as investors have preferred the safety of established companies with strong cash flows and certain dividend payments. When investors become less risk-averse, this will likely change and value investors will come to the fore again. But you are unlikely to time your switches between different investment strategies successfully.

      It may also be that your pension fund manger manages your investments actively, and is presently delivering above- average returns. Although fortuitous, understand that past performance is not a reliable indicator of future performance. In fact, empirically, the ONLY reliable indicator of future performance is the level of fees you pay, so this should always be your first point of analysis.

      While topping up your retirement savings is generally a good idea, taking out an RA may result in a duplication of costs (eg admin costs), in unnecessary costs (broker fees) and in higher asset management fees (often you are paying retail rather wholesales rates, as you would do in a reasonably-sized pension fund). In that scenario, topping up your pension fund would be more cost effective.

      Of course, you also need to consider your tax consequences. Can you deduct your top up contributions for tax or are you already at your maximum (7.5% of approved remuneration)? You should also be mindful of the termination charge you may incur iro of your RA, if you make it paid-up. If you are still young, you will likely make this up by investing in a lower cost vehicle.

      As you can see, there are numerous factors that may account for the performance difference, including just “luck”; to make an informed decision, you should consider all the potential reasons for the outperformance, and identify those that are sustainable (eg lower fees, different asset allocation) and those that are not (past outperformance through stock picking and market timing).

      Reply
  267. October 22, 2012 at 9:59 am, Jecica said:

    I have been working as a receptionist for Hatch for 5 months. When will I start earning the salary of my job as receptionist and what shall my salary earnings be as receptionist of Hatch Tand D?

    Reply
    • October 23, 2012 at 10:48 am, 10X Investments said:

      Jecica,

      You need to refer these questions to your employer.

      Reply
  268. October 19, 2012 at 12:22 pm, Matthew said:

    May you “leave” your property behind upon emigrating?

    Thank you for answering my previous question.

    To claim my RA, will SARS/SARB give me clearance if I have the following:
    Bonded house which a tenant lives in.
    Jointly signed bond with my wife (COP). She is not emigrating, as we are separated.

    Reply
    • October 23, 2012 at 10:37 am, 10X Investments said:

      Matthew,

      Yes, you may “leave” your property behind. SARS will not levy capital gains tax on your SA property on emigration – this is a specific exemption. Non-residents are not prohibited from owning property in SA.

      Reply
  269. October 18, 2012 at 4:05 pm, Matthew said:

    Do you have to formally emigrate in order for your RA to pay out?

    Hello,

    I have an RA in my name worth +/-R37K.

    I have dual nationality (SA & UK) and am returning to UK shortly. Do I have to formally emigrate to get my RA funds paid out?

    Reply
    • October 19, 2012 at 10:48 am, 10X Investments said:

      Matthew,

      Yes, you do. Although formal emigration sounds intimidating, it essentially just means that you have to sign off with the Receiver, to make sure you don’t leave while owing SARS some tax. SARS will issue you a clearance certificate that will allow the RA provider to pay you out. You may incur a termination charge on that, and pay tax on any amount above R22 500. Your other option is to make your RA paid-up and leave it behind (you may still incur a termination charge), but it then gets even more complicated to cash it in a few years hence.

      Reply
  270. October 18, 2012 at 1:19 pm, Loomz said:

    The pay-out timeframe of a deceased’s RA

    How long does it take for an annuity to be paid out if the client is dead?

    Reply
    • October 19, 2012 at 10:57 am, 10X Investments said:

      Loomz,

      The process can take up to a year. In line with section 37 of the Pension Funds Act, the trustees of the retirement fund will distribute the proceeds, considering first the needs of the deceased dependents and then the beneficiaries listed in their nomination form. The trustees will require an investigation to ensure that all dependents have been identified. “Dependents” does not just refer to spouse and children, but includes anyone who received financial support from the deceased. This may also include parents and foster children, or even just a relative living with the deceased. If the deceased listed all dependents on their nomination form, this allocation process can be relatively quick. If the circumstances are less clear, it can take a few months, or even a year.

      Reply
  271. October 18, 2012 at 2:57 am, Janine said:

    How to get the benefits of your RA if you have not formally emigrated

    Hi, I am 55 years old and my personal RA matured in September 2012. I am a women, British citizen and married to a South African. We left SA to work abroad in 1995 (we did not formally emigrate). Since leaving SA (18 years ago,) my Permanent Residence visa has expired. Please advise me on what my options are to get the benefits of my RA. Regards, Janine.

    Reply
    • October 19, 2012 at 11:05 am, 10X Investments said:

      Janine,

      This is a complicated and vague area of the law. We view it as follows:

      1. As a SA resident, you can withdraw from your RA upon formal emigration (signing off with SARS). The RA provider can then transfer the net amount into an offshore bank account.

      2. If you have left the country without emigrating, you need to go through this process with SARS now, to access your RA. As a former tax payer, SARS will still regard you as just “temporarily absent”. However, as you are no longer a resident, the RA provider may only pay this amount into a South African bank account. This means you must open a non-resident bank account.

      Also, as a non-resident, you potentially do not qualify for the available tax concessions on cash lump sums as these are intended for SA residents only. However, the source of the money is deemed to be South Africa, so you will be taxed on it here. The RA provider will deduct the required tax – possibly per the INCOME tax tables – on the account balance less your original contributions (other than those deducted for tax pre-1995).

      We have referred this question to National Treasury, as the process and rules governing your situation are not very explicit.

      Reply
  272. October 17, 2012 at 3:25 pm, Jean-Pierre said:

    The tax treatment of a living annuity

    I have read some conflicting information surrounding the tax treatment of living annuities. In this case we have a deceased person who has willed their living annuity to beneficiaries.

    1.) From an Estate Duty point of view, does the annuity form part of the estate (as per s3(2)(b) of the Estate Duty Act) or is it excluded (s3(2)(i))?

    2) If the beneficiaries elect to cash out the full balance of the annuity, will this be taxed in their individual hands or in the hands of the deceased (as some sites have said)?

    3) And what type of tax will a lump sum payout attract? CGT or standard income tax?

    Reply
    • October 23, 2012 at 12:44 pm, 10X Investments said:

      Jean-Pierre,

      As per Section 3(2)(i), if someone dies after 1 January 2009, any benefit which is due and payable as a consequence of membership or past membership of a retirement fund (as defined by the Income Tax Act) is not included in the definition of “property” for estate duty purposes, and is thus not subject to estate duty.

      If the living annuity is commuted upon the death of the member or former member for a lump sum, this is deemed to be a lump sum benefit taxable in the member’s hands immediately prior to their death. The tax payable by the member’s estate on the lump sum is recoverable from the person to whom or in whose favor the lump sum benefit accrues.

      The lump sum will be taxed as a retirement benefit, wit the first R315 000 not taxed, the second R315 000 at 18%, the third R315 000 at 27% and the balance above R945 000 at 36%. Previous amounts claimed as a cash lump sum will be deducted however. In other words, if the deceased previously cashed in a cash lump sum of, say R945 000 or more at retirement, then the entire remainder of the living annuity will be taxed at 36%.

      Reply
  273. October 17, 2012 at 11:31 am, Nicola said:

    Beneficiaries can decide whether they want to receive their benefit as a lump sum or an annuity

    If a member of a RA dies, does the beneficiaries receive the lump sum value, or do they still only receive the 1/3 cash and need to invest the remaining 2/3 into an annuity generating vehicle?

    Reply
    • October 17, 2012 at 12:03 pm, 10X Investments said:

      Nicola,

      The beneficiaries can now decide whether they want to receive their benefit entirely as a cash lump sum, or as an annuity, or as a combination of the two. If you choose the cash lump sum, the benefit will be taxed as though it has accrued to the deceased the day before he or she passed. If you choose an annuity, no tax is due on the amount used to purchase the annuity, but you will be taxed on the annuity income.

      Reply
  274. October 16, 2012 at 2:09 pm, Cherzaan said:

    What is the legal compliance for providing workplace RA’s?

    Hi,

    I am interested in finding out what the legal compliance is with regards to providing a retirement annuity within the workplace. We currently have 140 staff members and as a company contribute up to 50% towards our employees’ RA’s.

    I have researched the topic, but keep hitting a brick wall.

    Can you please provide some insight.

    Reply
    • October 17, 2012 at 11:59 am, 10X Investments said:

      Cherzaan,

      At present, there is no legal obligation to provide a work place fund in SA, although National Treasury is now contemplating this. An RA is not a work place fund per se, but a retirement fund for individuals. In a Group RA, you, the employer, act as facilitator, deducting and paying over the monthly contributions, but your employees still have to apply individually to become member of the RA. Unlike a traditional pension or provident fund (which is compulsory for employees meeting certain criteria), it is not mandatory for your employees to join the Group RA, or to contribute at a prescribed rate. This is because the fund contracts with your employee, rather than with you, the employer. Employees who leave can take their RA fund with them, and keep contributing to it. In other words, this scheme supports portability.

      As an employer, you may consider a Group RA if you wish to provide your employees with group-based retirement administration, without incurring the cost and oversight burden associated with an employer-sponsored retirement fund. Or you may wish to afford your employees flexibility in managing their retirement investment. Your employees can also use the Group RA to house the proceeds of previous employer-sponsored retirement funds.

      There is no automatic legal obligation on the employer to pay all or any portion of the contribution; the obligation will only arise out the employment contract, which may specify that the employer will contribute x% (or match the employee’s contribution) in the event that the employee joins the Group RA. The employer-matching contribution incentives the employee to join the fund.

      Your are not bound to the RA provider, to keep providing the facilitation role (subject to any SLA/notice period); you will be bound by the employment contracts you signed with your employees.

      Reply
  275. October 15, 2012 at 3:36 pm, Jackie de Villiers said:

    Can you withdraw your entire RA when it becomes due?

    If I decide to move to the UK and my retirement annuity becomes due in 5 years, am I able to take the whole amount? It will be about R500 000.
    Thanks so much

    Reply
    • October 17, 2012 at 11:56 am, 10X Investments said:

      Jackie,

      If you leave your RA to mature in SA, you will be required (at maturity or at any date thereafter), to use two-thirds to buy an annuity (monthly income stream). This annuity will pay out in SA, and the onus will be on you to get the proceeds across to the UK. As you need to apply for each transfer separately, this is a cumbersome and costly process. You can convert the remaining one-third of your RA into a cash lump sum, and take it across to the UK.

      Your other option is to formally emigrate when you leave SA. “Formal emigration” means you have to sign off with SARS. SARS ensures that your tax affairs are in order, and that you have paid any capital gains tax that may be due on your SA assets (other than any property you leave behind). The SARS clearance certificate allows you to cash in your RA, and you can then take the net proceeds with you. We say “net” as you will pay tax on the RA based on the withdrawal lump sum tax table, and the RA provider may levy an early termination “penalty”.

      You may defer the formal emigration process, but understand it is only open to SA residents. If you no longer meet the residency test, the formal emigration process may no longer be open to you, and you will either be stuck with the first option (buy an SA annuity), or you may have to pay full income tax on your proceeds (the law is not clear on this aspect).

      Reply
  276. October 12, 2012 at 2:11 pm, James C said:

    Hold your broker to these standards

    I have RA’s with 2 South African life insurance companies (A & B). The broker who has been handling my life insurance for the past 3 or 4 years works closely in association with a third life insurance company (C). I am 57 and need to cash in 1/3 of my RA’s and my broker wants to consolidate the remaining 2/3 of the RA investment in products of company C (with which he is associated). Is this a normal course of action or does the answer depend on the relative performance of the 3 companies? If so, can you advise where I can find info online for comparison of RA related investments. Thanks.

    Reply
    • October 15, 2012 at 5:08 pm, 10X Investments said:

      James,

      This is the normal course of action in the South African advisory market, which is notorious for resolving conflicts of interest in its own favor. But it is hardly the appropriate course of action. The FAIS Code of Conduct requires financial service providers to act in your best interest. Hold your broker to this standard.

      As you are aware, you must apply two-thirds of your RA proceeds towards an annuity, either a conventional or a living annuity. The first question you need to ask is which of these products is more appropriate for your needs. The conventional annuity offers a guaranteed income but gives you little flexibility. You capital dies with you. With the living annuity, you assume investment and longevity risk, but you have some flexibility on the draw-down rate and any remaining capital goes to your nominated beneficiary. If you choose the living annuity, your broker will probably receive a much larger commission (which you pay) than if you choose a conventional annuity. So make sure you choose what you need, not what your broker needs, and that you know what’s in it for him, in terms of fees.

      Secondly, you should expect your broker to find you the best deal in town for the product you choose. This may be from the company he is associated with, it may not be. Understand he may also be rewarded for the sum total of the business he brings in (called sales contests), which is a very frowned-upon practice internationally, but still common-place in SA. This may affect his judgement of what is in YOUR best interest.

      Let him show you a complete list of comparative quotes from a wide selection of life companies. Conventional annuity rates can differ greatly among life assurance companies, and from month to month. As far as we are aware of, there is no one site that will allow you to compare rates; it is really down to obtaining individual quotes from the various providers.

      Reply
  277. October 11, 2012 at 5:55 am, Kgothatso Hlungwane said:

    How long should it take for your RA to pay out?

    How long does it take for the money to be deposited into your account after cancellation of a RA policy?

    Reply
    • October 11, 2012 at 1:55 pm, 10X Investments said:

      Kgothatso,

      That may well depend on your age. If you have cancelled your RA policy, and the balance was over R7 000, then you may only claim your savings from the age of 55. If the balance is below R7 000, it will depend on the efficiency of the administrator and whether you have submitted all the required supporting documentation. If all is in order, it should take around 14 business days, but some administrators take longer. Your best bet is to contact them directly, and ask what is holding up the process, and whether they have all the required documentation from you.

      Reply
  278. October 10, 2012 at 4:40 pm, Anna Wathen said:

    Should you be paying tax on a lump sum annuity payout?

    My brother-in-law left me the proceeds of his annuity with Sanlam, which totaled R685 818.91. They added R19 793.75 interest and deducted R71 771.10 tax. Is it correct that I pay tax on an annuity payout? (It is a lump sum payment.)
    Thank you,
    Anna Wathen

    Reply
    • October 11, 2012 at 1:48 pm, 10X Investments said:

      Anna,

      It is not really you who owes the tax, but the amount is recovered from you. The lump sum pay-out is taxed as though your late brother-in-law had received it. The first R315 000 is not taxed, the second R315 000 is taxed at 27% and the balance to R685 819 at 27%. R315 000 x 18% = R56 700, (R685 819 – R630 000) x 27% = R15 071. Added together, R56 700 plus R15 071 equals R71 771. The deduction therefore appears correct.

      The R19 794 interest will be taxed in your hands (but interest income under R22 800 is exempt from tax).

      Reply
  279. October 10, 2012 at 1:16 am, Matshidiso Perkins said:

    You can cash in your RA before the age of 55 only if the balance is below R7 000

    I have a RA and will be turning 55 in Nov of this year. I stopped working in 2006 due to a prophetic calling that made it impossible for me to continue my job. I don’t have any form of income, because my calling requires me to help people without being paid. Is it possible to cash in my RA before my 55th Birthday? I desperately need cash! Please help!

    Reply
    • October 10, 2012 at 1:14 pm, 10X Investments said:

      Matshidiso,

      Our retirement law is not very flexible in this regard and allows you to cash in your RA savings before the age of 55 only if the balance is below R7 000, you have been forced to retire early due to ill-health, or you are formally emigrating. However, as you are about to turn 55 in November 2012, and we are already in October, your problem should resolve of its own accord within the next month. Make sure you have completed and sent in your fund retirement form with the required supporting documentation (esp. your bank account details), so there are no unnecessary hold-ups in paying out your benefit.

      Reply
  280. October 10, 2012 at 12:12 am, David R said:

    Are you are obliged to cash in your RA at maturity?

    Good evening,
    Two of my RA’s are very small. The fall due in Sept. 2014 with a total current value of R420k. Can I increase the term to, say, 2019 and/or increase the premium? If not, do you suggest an alternative?
    Kind regards

    Reply
    • October 10, 2012 at 1:20 pm, 10X Investments said:

      David,

      You are not obliged to cash in your RA at maturity (the end of your contracted contribution period), you can hold your RA for as long as you wish. The previous rule, that you had to cash in before the age of 70 has also fallen away. At the maturity date, you can choose to make your RA paid up, or lower, maintain or increase your contributions. You do not need to agree to a new term (and be bound by that). As these changes then fall outside the contract period, there should be no “penalties” for changing the term of the agreement. If your fees presently include broker commissions, make sure the administrator now stops deducting these fees, as the broker has received all amounts due and the administrator has deducted all amounts due. If your administrator objects, you can simply choose to transfer your RA (tax-free) to another RA provider, who will not charge such fees. In this context, you would do well to compare the admin and investment fees you are paying on your present RA’s to the rates offered by competitors – times have changed and there are now a number of low cost options available on the market (the 10X RA being one of them).

      Reply
  281. October 09, 2012 at 4:16 pm, Laurie said:

    Which factors determine your savings outcome?

    I have three RA policies:
    No. 1) 1978-2013
    R600 Annual Contribution, Ret Value Est= R380 800, SA Ret Ann Fund

    No. 2) 1980-2013
    R400 Annual Contribution, Ret Value Est= R190 000, SA Ret Ann Fund

    No. 3) 1981-2023
    R2 518 Annual Contribution, Ret Value Est= R880 000, Momentum High Performance? This Retirement Value does not make sense. Could you please advise?

    Reply
    • October 10, 2012 at 1:29 pm, 10X Investments said:

      Laurie,

      Your question, and your specific concern is not immediately clear. Do you not agree with the projected values, or do the numbers not make sense to you relative to each other?

      A number of factors determine your savings outcome (over and above your contribution rate and term); the most important are your asset allocation and the fees you pay. Different assets have different risk and return characteristics: shares have historically delivered a return of around CPI +7% pa over the long term (with high volatility), bonds and cash around CPI +1-2% pa (with lower volatility). A balanced portfolio of say 60% equities, 30% bonds and 10% cash should deliver you a real return of around 5% pa over time.

      5% is the return before fees. The average cost of a retail life-assurance RA in South Africa is around 3%, ie your realised real return will only be around 2%. That is a dramatic reduction, which why expensive investment products are such a bad idea.

      We don’t know the assumptions and asset allocations underlying your projected retirement values. The projected internal rates of return that underlie your three RA’s are 13%, 11% and 8% respectively (assuming fixed annual contributions through-out, fully invested with no deductions for life cover). Typically, these projections (when they were still allowed) were based on nominal returns (including inflation), and made before deducting fees. The compound CPI inflation over the past 30 years has been around 9.5% – 10%. But future inflation is unknown, and has structurally declined in recent years to around half that rate

      Reworking your projected retirement values, assuming a) historical average inflation at 10% pa b) projected future inflation at 5% pa c) a real portfolio return of 5% pa and d) annual fees of 3%, we would estimate your projected retirement values at R300 000, R200 000 (in 2013) and R1.8m (in 2023) respectively. Your specific fees and investment returns will obviously result in a somewhat different pay-outs. Returns in recent years have been well above the 5% (real) average.

      In the context of these workings, the projected value on your final RA does appear far too low – the number is in fact quite close to our estimate of its present value. You will have to inquire from your broker or the administrator as to the basis of this projection, and whether it makes sense relative to your asset allocation and fee deductions.

      Reply
  282. October 05, 2012 at 9:18 am, Sandra Benge said:

    Under what circumstances can you not cash in a RA?

    POLICY NO. 11518976000009

    Please help me!!! I would like to cash-in my R10 000,000. I understand from previous correspondence to other members that one can do this AFTER the age of 55 years. Please can I cash this policy? Please note that I am the designated recipient and I believe that one can cash in the R.A. Help please!!!

    Reply
    • October 05, 2012 at 12:50 pm, 10X Investments said:

      Sandra,

      If you are the owner of the RA (ie it was taken out in your name), then you can cash it in from the age of 55. But as indicated before, you cannot inherit an RA, only the related death benefit. If the death benefit was invested into another RA, in your name, then yes, you can cash it in if you are over 55. But if the death benefit was commuted into an annuity (a regular income stream), then you cannot cash this in. If you do own the RA, then please contact your RA administrator and request a retirement form, and they will process your application, and pay out the amount owing to you.

      Reply
  283. October 04, 2012 at 12:59 pm, Heather Lutge said:

    Is it possible to inherit an RA?

    I have an RA worth R10 000 which I inherited from my sister. Can I cash it in? I understand that you can only cash in if under R7 000, so if I forfeit the R3 000, can I still claim the R7 000?

    Reply
    • October 04, 2012 at 4:39 pm, 10X Investments said:

      Heather,

      You cannot really inherit a RA, as the product (and the related tax benefit) is attached to the person or member who has taken out the RA. If the person passes while still a member of the fund, then the administrator pays out the fund balance as a death benefit. Typically, this would go to the member’s financial dependents, at the trustees’ discretion. If there are none, the trustees will follow the member’s wishes as expressed on the beneficiary nomination form. Only if the member has no financial dependents and did not fill in a nomination form does the RA fall into the member’s estate.

      If you are the designated recipient of the death benefit, you may elect to receive the full amount as cash. This rule was recently changed (2010): before then a formula was used to determine how much of the benefit could be taken as cash, and how much had to be used to buy an annuity. The requirement to buy an annuity has now fallen away.

      The R7 000 limit you mention only applies to members who wish to withdraw from their RA before the age of 55.

      Reply
  284. October 04, 2012 at 12:49 pm, Jeremiah Rametse Maelane said:

    What is the process of retiring an RA?

    I would like to retire my RA, cash in on one-third and purchase another RA with the balance. What is the process to be followed?

    Reply
    • October 04, 2012 at 1:51 pm, 10X Investments said:

      Jeremiah,

      You need to request a Retirement Notification Form from your RA administrator. The form will specify the required supporting documentation, typically a copy of your ID, proof of your bank account and a signed copy of your annuity application form. The administrator will obtain a tax clearance certificate from SARS on your behalf, deduct the necessary tax (if applicable) and forward the balance(s) as per your instructions.

      You may cash in at most one third, you must use at least two-thirds to buy an annuity. You need to select either a living or a conventional annuity. Your administrator may help you with this (ie have a default option), but to get the best deal, you should shop around for the best rate (or fees) at the time. The conventional annuity is an insurance product that will pay a certain amount very month (depending on the type you choose), the living annuity is an investment product that will allow you to draw between 2.5% and 17.5% pa. This is not an easy decision and you may want to consult an adviser, or at least obtain more information from your RA administrator on your options.

      Reply
  285. October 04, 2012 at 12:35 pm, Diane Hensburg said:

    How to go about cashing in an RA

    My sister passed away and left behind an RA from which my other 3 sisters and I each received R10 000, from which we receive dividends every three months. Can I cash this money in and, if so, how do I go about doing this? I don’t want to receive dividends any more as I desperately need the cash as soon as possible.

    Reply
    • October 04, 2012 at 4:42 pm, 10X Investments said:

      Diane,

      You have provided insufficient detail to enable us to answer this question, so we have to surmise in parts. Also, we have just posted an answer to a similar (or perhaps related) question. The revised rule is that if you are the designated recipient of a death benefit, you may elect to receive the full amount as cash. This rule was recently changed (2010): before then a formula was used to determine how much of the benefit could be taken as cash, and how much had to be used to buy an annuity. The requirement to buy an annuity has now fallen away.

      Your question is puzzling as you refer to a dividend. If you used the death benefit to purchase an annuity, then you would receive an annuity income, not a dividend. If that is the case, and you purchased a life-time annuity, you cannot undo this transaction. If you purchased a fixed term annuity, you should be able to access the remaining investment balance. However, it seems unlikely that anyone would sell an annuity for such a small amount (R10 000).

      The term “dividend” suggests that the capital balance was invested on your behalf, and you are paid the net investment income quarterly, perhaps through a trust structure. This may have been in terms of your sister’s will or at the direction of the fund trustees, or your guardian. You need to establish where and how your money is invested, and on who’s authority. Assuming you are not (or are no longer) a minor, you should be able to access the capital balance.

      Reply
  286. October 04, 2012 at 10:12 am, Alain Cominotto said:

    What are your options regarding your RA when emigrating?

    Hello,

    I have an RA with Liberty Life, but will be emigrating to France in a couple of months. What are my options and what taxes are applicable? Thank you.

    Reply
    • October 04, 2012 at 12:46 pm, 10X Investments said:

      Alain,

      You have a number of options:

      1. You can make your RA paid-up, ie stop contributing, but leave your money in your South African RA, invested as you direct. Depending on your age and contract term, you may incur a “termination penalty” which will be deducted from you balance. Over the age of 55, you can retire from the RA. You may then take one-third as cash, with the balance you must buy an annuity that pays out in South Africa. The onus will be on you to expatriate this money. You will be taxed on this income in South Africa. The cash lump will be subject to the South African retirement lump sum tax table.

      2. If you do not formally emigrate, you can continue to contribute to the RA, although you will likely not have South African income to claim a deduction against. From age 55, the same applies as for point 1 above.

      3. If you formally emigrate, you can withdraw your RA and take your savings with you. “Formal emigration” means that you must sign off with SARS. SARS will assume that you sold all your assets on the day before you emigrate, and levy any capital gains tax that may be due. In return you will receive a clearance certificate that will allow you to cash in your RA. You will pay tax on your benefit per the withdrawal cash lump sum table (the first R22 500 is not taxed, the balance to R600 000 is taxed at 18%, the balance to R900 000 at 27%, and any further amounts above R900 000 at 36%).

      Reply
  287. October 03, 2012 at 11:49 am, Jeremiah Rametse Maelane said:

    Can you access only a part of your RA?

    I’m 60 yrs & 4mths of age and still employed. Can I access R7 000 of my retirement annuity?

    Reply
    • October 03, 2012 at 2:14 pm, 10X Investments said:

      Jeremiah,

      You cannot access only a part (ie just R7 000) of your RA. You can access the whole of your RA from the age of 55 (and even before then if your paid-up balance is less than R7 000). But you can only retire from your RA, you cannot withdraw (either wholly or in part). And when you retire from your RA. you may cash in one-third, and you must purchase an annuity with at least two-thirds of the balance.

      Reply
  288. October 03, 2012 at 7:54 am, Denise said:

    Can you get a loan against your paid-up RA’s?

    I have 2 paid-up Sanlam annuities:
    1. 9634718×2 (334) 1987 paid-up 09/1991
    2. 1275551863 (334) 7/1992 paid-up 11/2000

    I really would like to take a needed loan against them.

    Reply
    • October 04, 2012 at 9:23 am, 10X Investments said:

      Denise,

      In principle, yes, but only for very specific specific purposes (and subject to the rules of the fund). In terms of S19(5) of the Pension Funds Act, a registered fund (ie including an RA fund) may, if the rules permit and subject to the regulations, grant either a loan to the fund member or furnish a guarantee to another person who has extended a loan to the member. Such loans/guarantees must enable the member to either repay their existing housing loan, or take on such a loan to pay for/erect/make alterations to a residence in which the member, or their dependents, will live. Such a loan or guarantee must be secured by a first mortgage on that property and/or by a pledge of the member’s fund assets.

      S19(5) is quite lengthy and involved, specifying the applicable conditions and regulations, and the potential size of the loan. And remember that not all fund rules permit such housing loans.

      Reply
  289. October 03, 2012 at 7:52 am, Frans Wessels said:

    How is your severance pay taxed after retrenchment?

    Is severance pay (paid after retrenchment) part of non-RFI for tax purposes?

    Reply
    • October 03, 2012 at 1:20 pm, 10X Investments said:

      Frans,

      A severance payment is capital in nature, but the amount falls within the employee’s gross income per the Gross Income definition in the Income Tax Act. However, it is taxed according to the retirement lump sum tables, and no expenses may deducted from this income. As a capital payment, the amount cannot be considered to form part of either pensionable or non-pensionable income. And as the employee may not deduct any expenses from this benefit, the question becomes largely moot.

      Reply
  290. October 01, 2012 at 12:33 pm, Asanda Mabusela said:

    What happens when you surrender your RA policy?

    I am a holder of the retirement annuity. I would like to find out what happens if I want to surrender the policy. I’ve had it since 2006.

    Reply
    • October 02, 2012 at 10:41 am, 10X Investments said:

      Asanda,

      When you surrender your policy, or make it “paid-up”, you stop contributing to the policy, but your money will stay invested as before (unless you specify otherwise), and will continue to earn a return. You cannot access your money unless you are older than 55, you are formally emigrating, you have retired early due to ill-health, or the paid-up balance on your savings is below R7 000. In all likelihood, you will charged a “termination penalty”, for breaking the contribution term agreed with your RA provider. This will be deducted from your investment balance, and can be as high as 30% of your investment balance. This “penalty” relates to outstanding (unrecovered) upfront fees incurred on your behalf, mainly commission paid to your broker. You will continue to be charged administration and investment fees on your remaining balance.

      Reply
  291. September 30, 2012 at 4:45 pm, Reema said:

    Can you withdraw your RA before you retire?

    I have a retirement annuity with Liberty Life. It has a value of about R26 000 and I desperately require the money to pay a deposit for a place to rent. They can pay it directly to the rental agent. Is there any way that the annuity can be withdrawn?

    Reply
    • October 02, 2012 at 9:26 am, 10X Investments said:

      Reema,

      The rules as to when you may access your retirement annuity savings are strict and quite inflexible: you may only draw your RA savings from the age of 55 unless a) the value of your paid-up RA is less than R7 000 b) you have been forced to retire early due to ill-health and c) you formally emigrate. In other words, you RA provider may not return your money, for you to fund the deposit on the place you wish to rent. Fund rules permitting, retirement funds may provide housing loans, but this is subject to strict conditions and does not extend to rental agreements.

      Reply
  292. September 28, 2012 at 11:47 am, Herman said:

    Can you cash in combined investments above the value of R7 000?

    I have 2 paid up RA’s at Momentum to the value of R4 500 and R4 000 respectively. They say that I can’t cash in either of the RA’s, because the combined value is more than R7 000. Is this true? I am under the age of 55.

    Reply
    • September 28, 2012 at 1:53 pm, 10X Investments said:

      Herman,

      SARS applies the aggregation principle in most matters, to prevent investors side-stepping the law by splitting their investments. The aggregation principle is most commonly applied when investors have multiple paid-up RAs with individual balances less than R75 000, and hope to convert them all to 100% cash (rather than using two-thirds to buy an annuity). SARS does not permit that, and will also not allow cashing in multiple RA’s with balances below 7 000 each, but aggregating to more than R7 000 in total.

      Reply
  293. September 26, 2012 at 8:03 pm, JC Visser said:

    How you can obtain a tax certificate

    How can I obtain a tax certificate (retirement annuity)?

    Reply
    • September 27, 2012 at 12:47 pm, 10X Investments said:

      JC,

      If you are a 10X client, you will find your tax certificate in our member portal. You will need to log-in via our home page (www.10x.co.za) or directly (https://my.10x.co.za/index.asp). You will find your tax certificate under you account, under “Member documents”.

      If you are referring to a certificate confirming that you did not cash in your RA, you can request this certificate from the administrator. In the case of 10X, please contact Zanele Yonae at 021 412 7625.

      Reply
  294. September 25, 2012 at 10:51 am, Gisela said:

    Do R/A’s allow for access to the 1/3rd in favor of the welfare of children?

    I am divorced. My ex has been pleading poverty and has reduced his payments (over R12K already outstanding). I have been unemployed for a year due to medical reasons. Do R/A’s allow for access to the 1/3rd in favor of the welfare of the children?

    Reply
    • September 26, 2012 at 10:04 am, 10X Investments said:

      Gisela,

      Our retirement law has many features and facets, but compassion is not one of them. The rules on when you may access your retirement annuity savings are as explicit as they are strict: you may only draw your RA savings from the age of 55 unless a) the value of your paid-up RA is less than R7 000 b) you have been forced to retire early due to ill-health and c) you formally emigrate. Retirement fund law considers the welfare of financially-dependent children only if the retirement fund/RA member passes away while still a member of the fund. But if you are unable to work due to medical reasons, you may have grounds to claim your savings early. Please contact your RA provider, to establish the procedure and medical evidence required to prove your claim on these grounds.

      Reply
  295. September 24, 2012 at 7:26 am, Heather Grobler said:

    Are you permitted to sell your retirement annuity?

    I need to sell my retirement annuity policy ASAP, as I am unemployed and cash strapped. The value is approximately R100 000 and matures December 2013.
    Please can you assist – Heather Grobler, 072 480 6528.

    Reply
    • September 26, 2012 at 9:33 am, 10X Investments said:

      Heather,

      Our law does not permit you to sell, cede or pledge you retirement annuity policy. This is set down by our Pension Funds Act. The earliest you may cash in your RA savings is at age 55.

      Reply
  296. September 24, 2012 at 2:00 am, Marty said:

    What are your options when a RA matures?

    I have a small RA that matures October 2012, with a payout under R75 000. I also have many other RA’s, investment products and a provident fund with my employer. I’m 56 now and plan is to retire at 65. What are my options, as I don’t need the money now. It will be stupid to take the full payout if a person can only claim the tax-free portion once.

    Reply
    • September 26, 2012 at 9:41 am, 10X Investments said:

      Marty,

      Cashing in an RA before you officially retire (ie while you are still earning work income) is generally not a good idea as you are “pre-consuming” your retirement savings, and the annuity income will be taxed at your marginal rather than your average tax rate. Note however that the tax-free portion is limited in size, not to the first withdrawal. In other words, say you claim a R75 000 cash free lump sum on one RA, you can still claim a further R240 000 on subsequent RA’s (for the permitted total of R315 000).

      Normally, if your RA balance is less than R75 000, you can take the full amount as cash, But the aggregation principle applies, so if you have more than one RA, SARS will look at this in the context of the sum-value of all your RA’s (otherwise it would be too easy to circumvent this rule, by simply splitting your contribution among numerous RA’s).

      Fund rules permitting, you have a number of options:

      1. You can do nothing, ie leave the RA with the RA provider until you need the money. You can either make the RA paid up, or keep contributing until you do retire.
      2. You can cash in the RA. Applying the aggregation principle (assuming the total value of all your RA’s is above R75 000), you will have to use two-thirds to buy an annuity (either living or a guaranteed annuity). Because you are still earning a salary, that income may be taxed at a higher marginal rate than if you were already retired. Alternatively, SARS may allow you to cash in the full RA, but deduct this value from any future tax-free lump sum you qualify for.
      3. You can transfer the RA balance to one of your other RAs, free of tax.

      Reply
  297. September 22, 2012 at 7:53 am, Malesedi said:

    Does the Pension Funds Act permit loans against your retirement savings?

    I made a lump sum investment of R100 000 in 2007 into the Old Mutual Max Investment Plan (which is a retirement fund). Am I able to make a loan against this? I am not making any monthly payments into it.

    Reply
    • September 26, 2012 at 9:48 am, 10X Investments said:

      Malesedi,

      You should consult Old Mutual on the specific terms and conditions that apply to this product. Per the Old Mutual website: “From time to time, Max Investments allows you the flexibility to take zero-interest loans to meet your financial requirements. And to ensure your investment goals are met, you are able to repay these loans when your lifestyle allows for it.” This comes with the caveat: “Please note that certain terms, conditions and legal restrictions apply so be sure to read your policy document carefully.”

      Typically, the Pension Funds Act does permit loans against your retirement savings but only for very specific (housing-related) purposes.

      Reply
  298. September 20, 2012 at 1:52 pm, Denise said:

    Under what circumstances can you get a loan against your RA?

    Can I get a loan against my Sanlam Annuity?

    Reply
    • September 21, 2012 at 9:40 am, 10X Investments said:

      Denise,

      In principle, yes, but only for very specific specific purposes (and subject to the rules of the fund). In terms of S19(5) of the Pension Funds Act, a registered fund (ie including an RA fund) may, if the rules permit and subject to the regulations, grant either a loan to the fund member or furnish a guarantee to another person who has extended a loan to the member. Such loans/guarantees must enable the member to either repay their existing housing loan, or take on such a loan to pay for/erect/make alterations to a residence in which the member, or their dependents, will live. Such a loan or guarantee must be secured by a first mortgage on that property and/or by a pledge of the member’s fund assets.

      S19(5) is quite lengthy and involved, specifying the applicable conditions and regulations, and the potential size of the loan. And remember that not all fund rules permit such housing loans.

      Reply
  299. September 17, 2012 at 6:14 pm, Elize said:

    Are you required to retire from your RA when you retire from work?

    How can one reduce income tax at retirement by receiving R/A benefits two years after retirement?

    Reply
    • September 18, 2012 at 5:31 pm, 10X Investments said:

      Elize,

      You are NOT required to retire from your RA when you retire from your work. You can keep contributing to your RA (if you can afford to do so), or you can make your RA paid-up (ie stop contributing) after you stop working. Your decision to cash in your RA is separate from your decision to stop working, and you can delay cashing in for as long as you wish.

      Reply
  300. September 17, 2012 at 2:18 pm, Elsie de Jager said:

    What is the scope of SARS’s jurisdiction?

    Can SARS take my house if I owe them money? My house is not paid up yet.

    Reply
    • September 18, 2012 at 5:27 pm, 10X Investments said:

      Elsie,

      This is is not a retirement fund-related matter and therefore falls outside our area of expertise. You should consult a lawyer of tax specialist instead, for a detailed answer. In principle, however, SARS, as a creditor does have the right to attach your assets, including your property, to recover any outstanding debt (if the property is in your name). Whether it will do so is another matter. SARS’ claim ranks behind that of the lending bank, and any costs related to the sale of the property. You would have to have a lot of equity evident in the house, before SARS would consider such a move worthwhile. Even then, SARS will first investigate other ways to recover this money, before taking such extreme action.

      Reply
  301. September 13, 2012 at 7:44 pm, Francois said:

    Under what circumstances can you withdraw your retirement annuity?

    I am a client of the South African Annuity Fund and my investment with them is roughly worth R58 000 at this stage (I started contributing towards this fund in 2003). I would like to withdraw all the funds for personal use and rather contribute a larger sum of money towards my Sanlam annuity. Can you please explain to me what my penalties will be applicable in this regard.

    Reply
    • September 14, 2012 at 9:54 am, 10X Investments said:

      Francois,

      South African retirement fund law does not permit you withdraw from your RA unless 1) you are 55 or older, 2) you have taken early retirement due to ill-health 3) you are formally emigrating and 4) the balance is under R7 000. Based on the information provided, it appear unlikely that you will be able to cash in your RA. However, you can make this annuity paid-up. Your RA agreement should define the amount of penalties you will incur. Typically, the penalties relate to the accelerated recovery of upfront costs incurred on your behalf (mainly the commissions paid to your broker, and the interest charged on you notional loan account). The “penalty” will depend on the agreed contract term, the amount of the contributions, the agreed escalation rate, the interest rate charged by your RA provider and the rate of the broker commission. The “penalty” will limited to 30% of your investment balance. Be aware that by contributing to two RA’s, you are duplicating some costs unnecessarily; you could consider doing a full long term cost comparison of your two RA’s and perhaps transferring the one to the other. In the process, you may also want to consider other – low-cost – providers in the market. 10X can assist you with such a comparison.

      Reply
  302. September 13, 2012 at 11:55 am, Samantha said:

    The secret behind the annual escalations on debit orders on RA’s

    Is there is a maximum legal limit to annual escalations on debit orders on a retirement annuity?

    Reply
    • September 13, 2012 at 12:59 pm, 10X Investments said:

      Samantha,

      The annual escalation does not happen automatically – it must be specified in the agreement between you and your RA provider. Your broker may have advised you to take a high escalation – say 15% pa – “to counter the effects of inflation”. That would be a vague and meaningless statement, with the primary goal of enhancing the broker’s commission. More appropriately, your contribution should keep pace with your income (ideally you should save 15% of your income every year). If your contribution escalation exceeds your income growth, you will ultimately exceed the allowable deduction for RA contributions (15% of non-pensionable income), and the contribution may become unaffordable. Unfortunately, if you are in a life company RA, and you have used the services of a broker, and you have contractually agreed to the escalation, you are likely to be “penalised” if you request the contribution rate to be lowered. This “penalty” claws back some of the commission paid to the broker for getting you to agree to a high escalation rate.

      Reply
  303. September 11, 2012 at 5:23 pm, Bernice Bronkhorst said:

    What is the difference between retirement funding income and non-retirement funding income?

    An employer will not recognise the fact that there is a difference between retirement funding income and non-retirement funding income. Could you please explain this?
    Thank you

    Reply
    • September 12, 2012 at 9:20 am, 10X Investments said:

      Berenice,

      Retirement funding income is the income used by the employer to calculate contributions – either from the employer, the employee, or both – to the workplace retirement fund (pension or provident fund). The employer lays down the rules as to what is included in “retirement funding income”. This will usually include any fixed remuneration (ie salary and wages), and may or may not include variable amounts such as commission income and discretionary bonuses. In some instances, pensionable salary is defined as a percentage of the employee’s “cost to company”.

      Income on which the employer does not apply a retirement fund contribution is classified as “non-pensionable” or “non-retirement funding income”. Other than determining the correct and lawful retirement fund contribution, the distinction is important for employees who also save outside the company pension fund, through an RA. These employees may deduct 15% of non-pensionable income in respect of their RA contributions.

      Thankfully, from the perspective of employees also saving through an RA, the distinction between retirement and non-retirement funding income should fall away within the next year or two. Individuals under 45 will then be allowed to save 22.5% of the larger of gross salary or taxable income (limited to R250 000 pa), irrespective of whether the savings flow into a workplace fund or an RA.

      However, this does not absolve the employer from specifying which portion of employment income requires a retirement fund contribution, and which will not. Failing to pay over the required retirement fund contributions by the seventh of every month – in arrears – constitutes an offense per S13A of the Pension Funds Act. Late payments attract interest, and the administrator must notify both the FSB and the fund members.

      Reply
  304. September 10, 2012 at 4:23 pm, Heidi Lin said:

    Can you cash in your RA in the event of ill-health?

    Hi. I am interested in investing in a retirement annuity. However, I would like to find out what happens in the event of cancer, for example, before the retirement age? I have a family history with both my parents and grandparents dying of cancer around the age of 50.

    Reply
    • September 11, 2012 at 5:48 pm, 10X Investments said:

      Heidi,

      The general rule is that investors may not access their RA before the age of 55. There are two exceptions which relate to emigration and ill-health. If you need to retire early due to ill-health, the Fund Trustees will also allow you to retire early from your RA. At that point you will be required to use two-thirds of your investment account to purchase an annuity, either a guaranteed or a living annuity. The living annuity will allow you to withdraw as much as 17.5% of your investment balance pa. The income will be taxed per the income tax tables. The other one-third you may take as a cash lump sum. This will be taxed per the prevailing retirement cash lump sum tax tables.

      In the event that you pass while still a member of the RA, the RA Fund trustees will allocate your retirement benefit. They will refer to your beneficiary nomination form, but their primary responsibility is to first make sure that all your financial dependents have been provided for. Only if you have no dependents, or they have all been provided for, will they consider your wishes per the nomination form. If you do not have any dependents, and you have not filled in a nomination form, then the proceeds fall into your estate.

      Reply
  305. September 08, 2012 at 9:31 pm, Gugulethu said:

    What should you do if your fund contributions were never allocated?

    Hi,

    I was an employee of a company when I resigned. I asked to cash in 70% and to cash the remaining 30 % in to my RA, only to be called after a year by my RA company, Sanlam, and be told that the funds were not allocated to my RA due to missing documents from the administrator of my former employer. When I asked if it’s possible to get the funds, I was told that I can, but they would need a letter stipulating where the funds are to be returned to. The administrator doesn’t want to receive the funds, tax me or refund me what is left. I want my money back. I’ve asked to change the instruction on my ROT so that the funds can be invested into a different portfolio since if they went into the RA, they will be locked in. I took this to the PFA and they ruled to have the funds invested in my RA. I don’t want this anymore since the mistake was with the administrator. They don’t want to take responsibility for their incompetence. How do I get my funds back from Sanlam?

    Reply
    • September 11, 2012 at 9:23 am, 10X Investments said:

      Gugulethu,

      Seeing that this matter has already been before the Pension Funds Adjudicator, it appears very unlikely that you will achieve a different outcome by some other means. There appear to be two issues here. Firstly the administrator was at fault for not submitting the necessary supporting documentation to Sanlam, although Sanlam, in not following up on this matter sooner, is not entirely blameless either. Secondly, you have changed your mind about the remaining 30% of your proceeds, as you appear to have become aware only now that you will not be able to access this money until the age of 55. With all due respect, the fault here lies with you, and you should have informed yourself earlier of the difference between a RA (no withdrawal before the age of 55) and a preservation fund (one full or partial withdrawal allowed before the age of 55). It appears that you want to use your administrator’s mistake to avoid the consequences of your own. Although we cannot speak for your administrator, it may be that they cannot take the same withdrawal back to SARS, to receive a further tax certificate on this payment. As far as SARS is concerned, you have dealt and decided on this matter. Not all pension fund rules are entirely logical, and often they are not flexible at all, and this may well be one of those instances.

      Reply
  306. September 08, 2012 at 10:50 am, Vilma said:

    Can you decrease your premium penalty?

    With Liberty Life’s Excelsior retirement annuity you do have the option to have a premium holiday of up to 6 months. You can also decrease your premium permanently or temporarily.

    Reply
    • September 11, 2012 at 9:34 am, 10X Investments said:

      Vilma,

      Thanks for your input. Can the client request these changes without incurring any penalties? If yes, than that is certainly a step in the right direction for the industry. Hopefully other providers will follow suit.

      Reply
  307. September 03, 2012 at 3:15 pm, Julandi said:

    Can you make a loan from your pension fund?

    Hi, I want to loan a sum of my pension money; how does it work and can I do that?

    Reply
    • September 04, 2012 at 9:22 am, 10X Investments said:

      Julandie,

      By law, you are NOT permitted to borrow money from your pension fund. The only exception relates to a housing loan; this has to be allowed by the specific fund rules, and comply with the requirements set down by the Pension Funds Act.

      Reply
  308. September 02, 2012 at 1:15 pm, Michael du Toit said:

    Is there any reason not to cash in a paid-up RA?

    I am 60 years old and have a number of RA’s, some of which are paid-up. I am still working and am unlikely to retire before 65. I earn a very good salary and have considerable other savings and investments. Am I entitled to cash in (ie take the 1/3 lump sum and purchase a fixed term annuity from the balance) my RA’s now, rather than when I finally retire? If so, is there any reason not to do so?
    My reasons for considering cashing in are twofold. Firstly, I believe that I can achieve a better investment return than the insurance companies. Secondly, I want to ensure that I receive the full benefit of the RA before I die.
    My other savings/investment will be more than sufficient to fund my retirement after the RA funds are depleted.

    Thank you.

    Reply
    • September 03, 2012 at 1:29 pm, 10X Investments said:

      Michael,

      You are entitled to cash in your RA from the age of 55, irrespective of whether you have retired or not. You cannot however purchase a fixed term annuity (an annuity that only pays out for a certain number of years); this is not permitted by our law. The intention is that this money should provide you with income through-out your retirement. You can however take out an annuity that is guaranteed to pay out for a fixed number of years (say ten years), even if you die sooner. With a standard guaranteed annuity, your capital dies with you.

      We appreciate your thinking: the sooner you cash in, the longer the RA will pay out and the more money you will receive over your remaining life time. But it is not quite so simple and there are good reasons to defer cashing in your RA.

      Given your current age, the annuity will pay out a lot less than if you only ‘retire’ in, say, five years time. Further, your annuity income will be taxed at your marginal tax rate; as you are still earning a good salary, the annuity will probably be taxed at 40% (compared to an average tax rate of say 20% or 25% if you no longer earn a salary). Over and above the tax penalty, you should appreciate that the investment return earned within a retirement fund (such as an RA) is not taxed whereas you would pay tax on interest, dividends and capital gains if you invest on your own.

      Agreed, by investing on your own, you may save on expensive asset management fees, but you need to test your belief that you can “earn a better return than the insurance companies”. If you invest in low cost, well diversified index funds that may be the case. But if you plan to build your own portfolio, the odds are against you. To do so, you must either get very lucky or you investment acumen must exceed the collective insights and skill of all the professional fund managers and investment analysts employed by the insurance companies (effectively the market). Alternatively, you may plan to take on more risk, to earn a higher return. But is that additional risk commensurate with the additional return? And is it appropriate for your investment time horizon?

      Given all these factors, you should (re)-evaluate whether your investment performance will really beat your RA fund’s performance seeing you also have to overcome the hurdles imposed by the high marginal tax rate you will pay on your annuity income, the tax you will pay on your investment income, and the limited time you have to monitor your investments.

      But you have other alternatives as you are not compelled to purchase a guaranteed annuity with two-thirds of your RA proceeds, you can also opt for a living annuity. You pay no tax on the transfer, you do not pay tax on your investment income, you can choose your own investments within the living annuity structure, you can limit your annual draw-down to 2.5% (0% if the proposed retirement reform comes to pass) and your capital does not die with you (ie the money will go to your dependents or nominated beneficiaries if you have no dependents). This structure appears more suitable for your needs, especially as you do not need to assure your retirement income with a guaranteed income (you appear to have sufficient alternate funds).

      If you choose the living annuity option, you should, as always, be wary of high fees, both on transfer to the living annuity and on your investments. Fees effectively form part of your draw-down, and if you pay high fees, your actual draw-down rate is much higher than your stipulated draw-down rate.

      Reply
  309. August 31, 2012 at 1:48 pm, Cheree Botha said:

    What is the maximum penalty that may be charged when reducing your annuity?

    I want to reduce my monthly contribution to my retirement annuity, but the broker wants to charge me a penalty of 15%. What is the maximum penalty to be charged when reducing your monthly annuity contribution?

    Reply
    • September 03, 2012 at 5:20 pm, 10X Investments said:

      Cheree,

      Your broker is not at liberty to charge you a penalty, only the life company. What typically happens when you enter into a RA with a life company, the life company incurs upfront fees (such as broker commission); the life company sees this as a loan granted to the RA holder (you), and recovers this loan (with interest) from your contributions over the contractual term of the RA. If you reduce your premiums, then the life company will have to recalculate its loan amortisation schedule, and recover any “arrear amounts”. This is the “penalty” you incur although it is not so much a penalty as an accelerated recovery of costs. The point is that your broker cannot charge this ‘penalty’, only your life company.

      The amount of the penalty depends on a host of factors, including the contracted contribution period, how long you have contributed, and the amount of your broker’s commission. Total penalties (on making a RA paid up, ie ceasing all contributions) are now limited to 30% of the investment value, and, if the policy was taken out after 1 January 2009, to 15% of the investment value. You should be able to verify the amount of the penalty by referring to your policy and/or fund rules, or ask your broker to prove the amount with reference to these rules.

      Reply
  310. August 30, 2012 at 4:59 pm, Susan Harding said:

    Can you receive your retirement lump sum early if you are on permanent disability?

    I am 50 years old and on permanent disability. I retired from Chevron Research in 1992. Because I am disabled, they say I can get lump sum when I turn 55 (instead of 65). My question is: can I get the lump sum now?

    Reply
    • September 03, 2012 at 1:22 pm, 10X Investments said:

      Susan,

      The earliest you are permitted to access your retirement fund is age 55. The law does make exceptions for ill-health, but not if you receive disability income, as the purpose of disability cover is to provide you with income up to your normal (or specified) retirement date.

      Reply
  311. August 30, 2012 at 11:37 am, Tania said:

    What is the tax deduction rate on non-pensionable income?

    What is the maximum allowable tax deduction on a retirement annuity if the pensionable salary is R400 000?

    Reply
    • September 03, 2012 at 1:15 pm, 10X Investments said:

      Tania,

      The allowable deduction on your retirement annuity is based on your non-pensionable income. You are presently allowed to deduct RA contributions up to 15% of your non-pensionable income. Alternatively, you may deduct either R3 500 less current deductions to a pension fund or R1 750 (whichever of these three numbers is the greatest). Any excess contributions may be carried forward to the next year of assessment. To give you a definitive answer, we would need to know your non-pensionable income.

      Reply
  312. August 23, 2012 at 5:53 am, Denver said:

    How to get money from your annuity

    Hello. I just want to know if there no other way, except being 55, emigrating, or being declared very ill, to get money from my annuity? Thank you.

    Reply
    • August 23, 2012 at 12:46 pm, 10X Investments said:

      Denver,

      Other than the reasons you mention, the only other circumstance that will permit you to do so is if your annuity’s paid-up value is under R7 000.

      Reply
  313. August 22, 2012 at 4:53 pm, Celia Wiltshire said:

    What penalties do you pay when you surrender your retirement annuity?

    I would like to surrender my retirement annuity. Do I get paid out from the premiums I have invested? If so, when and what penalties do I pay?

    Reply
    • August 23, 2012 at 12:59 pm, 10X Investments said:

      Celia,

      It is not possible to surrender your retirement annuity (unless its value is below R7 000), you can only make it paid-up. Even if your RA is paid-up, you can only access your funds from the age of 55 onward (other than for purposes of emigration and ill-health). If you make your RA paid within your agreed contribution period, you will incur termination penalties.

      The “termination penalty” is an accelerated recovery of upfront costs incurred on your behalf. These costs relate to the sales commission and the life company’s “new business” costs. These expenses are incurred up-front and posted as a liability (debt) against your RA. This liability initially grows as the life insurance company charges you interest on its loan. The liability reduces by the fees deducted from your investment. The amount of the recovery depends on a number of factors including the agreed term (number of years) of your RA contributions, the commission rate agreed with your broker, the period you have held the RA and the interest rate charged by the provider. The longer the contractual term and the higher the commission rate, the higher the recovery is likely to be. The longer you have held the RA, the greater the amount already recovered by the life company, and the smaller the recovery is likely to be. The interest rate charged depends on the service provider; some are known to charge rates not far off the usury rate.

      In the past there was no limit to the amount of the penalty and some investors forfeited their entire investment. The law has now been changed, limiting the recovery to 30% of the investment value. For life assurance RA’s sold from 1 January 2009, the penalty is restricted to a maximum of 15% of the investment value.

      Note that not all RA providers charge a termination penalty. For example, you do not incur upfront fees with the 10X RA, and therefore also not termination charges.

      Reply
  314. August 22, 2012 at 2:28 pm, Una Pasqualli said:

    How much of your RA contributions can you claim back from SARS?

    I have a RA with contributions of R2 400 per month. How will this work if I complete my tax return, what do I get back?

    Reply
    • August 23, 2012 at 12:52 pm, 10X Investments said:

      Una,

      You are permitted to deduct 15% of non-pensionable salary at present. Pensionable salary is the salary used by your employer to calculate his (and possibly your) contribution to your workplace retirement fund (pension or provident fund). if you do not belong to a workplace retirement fund, then your entire income will be deemed non-pensionable. The amount you get back depends on your marginal tax rate (ie the highest tax rate you pay on any part of your income). Say your marginal tax rate is 30% (you earn between R250 000 and R346 000 pa, all of it non-pensionable income), then you will be allowed to deduct the full R28 800 pa (12 x R2 400). SARS will then refund you R8 640 (30% of R28 800). If you pay marginal tax at 40% (the highest marginal tax rate), then you would get back R11 520.

      Reply
  315. August 21, 2012 at 4:00 pm, Sandile said:

    Does a RA reduce your tax bracket?

    How will a retirement annuity reduce my tax bracket?

    Reply
    • August 22, 2012 at 11:04 am, 10X Investments said:

      Sandile,

      A retirement annuity does not “reduce your tax bracket” per se. However, you are allowed to deduct contributions up to 15% of non-pensionable income. These deduction happens at your marginal tax rate (the highest tax rate you pay on any part of your income). This has the effect of lowering the average tax rate charged on your net (after RA contribution) income. Note that the 15% deduction is presently only allowed in respect of non-pensionable income. If you belong to a workplace pension or provident fund, chances are that most of your income will be considered pensionable, and you will not obtain a significant further tax break from taking out a RA.

      Reply
  316. August 21, 2012 at 9:38 am, Mame said:

    Who should you invest with over the short term?

    Hi there,

    I need advice with regards to investing at the right portfolio, as I think banks don’t make much difference. I would like to know where can I invest R50 000 that I am currently not using but will need it in a 6mth period with good interest.

    Thanks

    Reply
    • August 21, 2012 at 10:28 am, 10X Investments said:

      Mame,

      We do not offer specific investment advice of this nature. In principle, however, as you have such a short investment time horizon, you cannot afford to assume much investment risk, as this may cause you to lose some of your capital. Investing your money in a savings or money market account is therefore your most pragmatic option. Interest rates on cash are very low at the moment, the best you should expect over six months is probably between 5% and 5.2% pa. Inquire from your bank what rates they offer on 3m or 6m deposits. You should also appreciate that over six months, the difference between earning, say, a low risk 5% pa with a reputable bank, and a riskier 7% pa somewhere else will only translate into around a R500 difference over six months. Not worth it.

      Reply
  317. August 20, 2012 at 10:57 am, Adri Roodt said:

    Follow the link below to get an immediate quote on a 10X RA

    Please can you give me a qoute on an annuity fund. I am 25 years of age.

    Reply
  318. August 19, 2012 at 9:24 am, Bobo said:

    Can a government employee also take out an annuity?

    Can you take out annuities when you work for the government?

    Reply
    • August 21, 2012 at 9:07 am, 10X Investments said:

      Bobo,

      Yes, retirement annuities are open to all all individual investors. Presently, your tax deduction is limited to 15% of non-pensionable income. Pensionable income is the income used by your employer (in your case the state) to calculate contributions to the Government Employee Pension Fund (7.5% from the employee, 13% from the employer). These rules will change from March 2014. From that point, if you are under 45, you may deduct total contributions to any and all retirement fund, up to 22.5% of gross salary or taxable income (whichever is higher), but limited to R250 000 pa. If you are 45 and older, the limits are set at 27.5% and R300 000.

      Your present total contribution rate of 20.5% at the GEPF will obviously limit the extent of further deductions you may gain by taking out an additional RA. In a defined contribution fund, a 20% contribution rate would typically be more than sufficient to create an adequate retirement pot, assuming a 35-40 year contribution term.

      As the GEPF is a defined benefit fund, your benefit will depend on your length of pensionable service and your final average salary. If you joined the GEPF late and you cannot afford to buy back service, and you are over 45, then a retirement annuity is a tax-effective way to supplement your retirement savings. But be sure though to find a low-cost RA as high fees will undermine your savings efforts.

      Reply
  319. August 16, 2012 at 3:57 pm, Godfrey said:

    Can you make a withdrawal from your pension fund when changing employers?

    I transferred my provident fund from my first employer to a product that my current employer had (now discontinued) and at the time I was not aware of the differences in the types of funds one can take. I was in the process of moving from my first employer, only to be told I have in fact joined a RA with my current employer, contrary to my original belief that I was to be continued on a provident fund.

    Now I am told that I can not access the funds in the RA (I missed the chance of joining 10X) of my current employer, whom I am leaving soon. Funny enough, I am also told that had I come forward in time, I would have been eligible to join 10X from my current RA. I really need access to these funds – what are my options?

    NB, my new (prospective) employer also has a pension scheme of their own and I know that I have the option of transferring all my funds again, but in this instance I would like to make a partial withdrawal.

    Reply
    • August 17, 2012 at 12:53 pm, 10X Investments said:

      Godfrey,

      A provident fund is a group retirement scheme, a RA is a retirement fund for individuals. You will only encounter a RA in the work place in the case of a Group RA. Even here, the employer only facilitates the deductions – the savings arrangement is still between the RA provider and the individual (you), and you would have signed an agreement to this end. The terms and conditions (that you would have acknowledged to have read and understood) would have informed you of the restrictions that apply to a RA. But notwithstanding your own responsibility in this matter, it appears that you were poorly advised.

      If your provident fund savings were moved into an RA, then yes, your savings are now locked up, at least until the age off 55. You can still invest with 10X, by transferring your present RA to 10X (minimum lump sum is R50 000 or minimum contribution of R1 000 pm), but you may incur termination charges with your current RA provider.

      Regarding your new employer, as a joining employee you will be compelled to join their pension fund. You cannot, however, transfer your RA to your new employer’s pension fund. This affects a) your ability to keep contributing to your current RA and b) the tax deductibility of your present RA contributions. This has all kinds of ramifications.

      If you cannot afford to contribute to the RA any longer, you will have to make it paid up, and potentially incur termination charges. It will remain locked up until you turn 55 (unless the balance is less than R7 000). If you keep contributing, you may only deduct contributions up to 15% of your non-pensionable income. Pensionable income is the income used by your new employer to determine his and your contribution to the pension fund. If all your income is pensionable, you will only be allowed to deduct the minimum iro of your RA contribution (R1 750 pa). Any other amounts will be carried forward. (Note our law is changing in this regard, and the distinction between pensionable and non-pensionable income should fall away in 2014, and you will then be allowed to deduct contributions up to 22.% of your gross salary, irrespective of whether they are to a pension, provident of RA fund).

      The bottom line on accessing your RA savings is that you cannot do so before you turn 55 (other than for reasons of ill-health or emigration).

      Reply
  320. August 16, 2012 at 3:51 pm, M Chalmers said:

    Which retirement annuity fund contribution may you deduct?

    If my contribution for the year is R7 054, what must be deducted to carry forward to the next RA year?

    Reply
    • August 17, 2012 at 12:49 pm, 10X Investments said:

      You may deduct the following retirement annuity fund contribution: The greater of

      15% of non-pensionable income
      R3 500 less current deductions to a pension fund
      R1 750

      Pensionable income is the income used by employers to determine their (and possibly their employees’) contribution to a workplace retirement fund. If you do not contribute to a work place retirement fund (pension or provident fund), or you are self-employed, then essentially all your income will be non-pensionable. If you do contribute to a pension fund, you may still deduct at least R1 750, or R3 500 less those contributions. (These last two concessions date back to the last century, and have become largely irrelevant in light of inflationary income and contribution growth).

      You may carry forward any RA contributions that you were not allowed to deduct in the current year. Subject to the given limits, you may deduct these in future years, or else the amounts can be added to the tax-free cash lump sum at retirement.

      Reply
  321. August 12, 2012 at 6:49 am, Creslyn Abrahams said:

    Retirement annuity tax implications

    What are the tax implications if I retire at 55 and carry on working normally?

    Reply
    • August 13, 2012 at 5:08 pm, 10X Investments said:

      Creslyn,

      You can only retire from your pension or provident fund at age 55 if you leave your employer at the same time. In other words, you cannot retire from the fund and expect to carry on working normally under those circumstances.

      You can only ‘retire’ and carry on working normally if you are a member of a RA fund, which exists independent of your employment. You can retire from an RA earliest age 55. You may take one-third as a cash lump sum; you must use at least two thirds to purchase an annuity (living or compulsory). The cash lump sum is taxed according to the cash lump sum tax table at retirement: the first R315 000 is not taxed, the second R315 000 at 18%, the third R315 000 at 27% and the balance above R945 000 at 36%. The annuity income will be taxed per the personal income tax tables currently applied to your work income.

      As this income is effectively added to your work income, it will be taxed at your marginal (highest) tax rate. But if you delay cashing in your RA until you do actually retire from work, it will be taxed at your average tax rate, which is likely to be much lower.

      By holding on to your RA until you do retire, you are not only likely to have more money saved (and therefore receive a higher pension in retirement), but this income will also be taxed at a lower rate. In other words, barring serious ill-health, retiring from your RA while still earning regular work income is not ideal, either a retirement saving or a tax perspective.

      Reply
  322. August 10, 2012 at 11:42 am, Alfred said:

    Under what circumstances are you allowed to surrender your policy?

    I took out a retirement annuity with Old Mutual at the beginning of 2010 and would love to surrender the policy in August 2012. How much am I likely to get? N.B. The premium started at R300 and now it’s R340.

    Reply
    • August 13, 2012 at 9:35 am, 10X Investments said:

      Alfred,

      You will have to contact Old Mutual to obtain the surrender value for your policy. You will only be able to surrender the policy if the investment balance is R7 000 or less. You appear to have contributed more than R7 000 in total since then, but after deducting fees and (potential) early termination charges, your net investment balance may end up being lower than your total contributions, and may well fall below the R7 000 limit.

      Reply
  323. August 10, 2012 at 11:00 am, Johan van der Vyfer said:

    Why is a retirement annuity tax-effective?

    I’ve read through your Education Section, but I’m still a little confused. How exactly does a RA function and why is it tax-effective?

    Reply
    • August 13, 2012 at 9:41 am, 10X Investments said:

      Johan,

      An RA is retirement fund for individuals. Individuals contribute monthly to the fund (usually per debit order); this money is invested according to their preference (if they may select their preferred fund(s) and asset allocation), or, in the case of 10X, in the appropriate 10X Life stage portfolios (based on their age and indicated retirement age). At retirement (earliest age 55), the investor may take up to one third of the investment balance as a cash lump sum, at least two-thirds must be used to purchase an annuity (either a living annuity or a compulsory annuity).

      Presently, individuals may deduct contributions up to 15% of non-pensionable income for tax purposes. From March 2014, this will change to 22.5% of the higher of taxable income or gross salary (limited to R250 000 pa) for under 45′s and 27.5% (limited to R300 000) for 45′s and older.

      RA’s provide further tax relief in that investment income earned by an RA is not taxed, and on retirement, the investor qualifies for lump sum tax relief (the first R315 000 is not taxed, the second R315 000 is taxed at 18%, the third R315 000 at 27%, and the balance above R945 000 at 36%).

      The RA structure is tax-efficient because contributions are deducted at the investor’s marginal rate, whereas the proceeds are taxed according to the lump sum tax tables (for the cash lump sum) and the average tax rate (per the prevailing personal income tax tables) for the annuity portion. Investors benefit as the marginal tax rate at which contributions are deducted will always be higher than the average tax rate paid on the cash lump sum and/or the annuity portion.

      Reply
  324. August 10, 2012 at 10:59 am, Gloria said:

    Retirement annuity pitfalls

    I’m a self-employed business owner and I’m at a stage now where I can afford to start looking into investing in a retirement annuity. Whilst shopping around, what are the pitfalls I should be aware of?

    Reply
    • August 13, 2012 at 5:03 pm, 10X Investments said:

      Gloria,

      There is no doubt you need to tread warily. The retirement industry’s practices underlie a self-interest that conflicts strongly with your savings goal; only informed investors will detect and avoid these ruinous practices.

      The elements of successful retirement investing can be summarized as follows:
      1. save long and consistently – up to 40 years if possible

      2. save at least 15% of the income you wish to replace

      3. use the available tax benefits of a retirement fund (pension, provident or RA)

      4. diversify broadly

      5. maintain a risk-appropriate asset allocation.

      6. avoid active management risk by choosing index funds

      7. pay low fees

      These elements do not change from day to day nor do they do not have to be revisited annually. Apply these simple principles and you have the tools for a successful retirement plan.

      Points 1 to 3 are under your control, but most investors will probably rely on the retirement fund industry and/or their financial adviser, to ensure they comply with points 4 to 7.

      Diversifying broadly means investing your savings in a wide range of financial securities (both local and international) from a number of asset classes (essentially shares, bonds, property and cash).

      To be risk appropriate, your asset allocation should reflect your age and expected retirement date. Young(er) persons can typically assume more investment risk than old(er) ones. Shares are typically regarded as riskier investments as their short-term return is uncertain; however over the long term they have historically provided the highest return.

      Young investors can afford to sit out the short term volatility and invest the bulk of their retirement savings in this asset class. Bonds and cash have more certain short-term returns, but historically this has been much lower than for shares. These asset classes are more suitable for investors near retirement who wish to preserve their accumulated savings. Invest more in these asset classes as your near retirement.

      Points 6 and 7 are problematic as the broad retirement fund industry has an (undeclared) self-interest to pursue an active investment style and charge high fees. This conflicts with your own needs.

      Be aware of the active management risk: When you shop around, you may be tempted to pay high investment fees in return for an active fund manager who will potentially deliver a market-beating return.

      You will find many fund managers boasting about their past market-beating performance. Why should you be wary? Simple: to compete on investment performance (as these funds do), they have developed hundreds of funds, knowing that such a shot gun approach will deliver a few outliers with above average returns. There are around 1 000 unit trusts, remarkable given that most large fund managers are limited to no more than 60 investable shares on the JSE. But by marketing their top performing funds, they can continue to attract new money, despite their many other underperforming funds.

      These underperforming eventually just “disappear”. According to research conducted by Dr Mark Pawley, half of all unit trusts ‘die’ after 20 years due their poor performance – they close down or merge with better performing funds.

      Your asset manager will also caution that past performance does not guarantee future performance. In fact, studies show that performance persistence is quite rare. Understand that as a group these active fund managers can earn no more than the market return. Investing is a zero-sum game and for every rand that beats the market there is a rand that underperforms by the same amount. After fees, it becomes a losing game – the relative winners are those who pay away these least in fees. Yes, there are a few absolute winners, but most actively managed fund produce net returns below the market. As a group, the winners are those who earn the market return at a lowest cost. This is typically achieved with low cost index funds.

      Be aware of high fees: The long run real (after-inflation) return on a balanced portfolio is around 5% and the average fees for most retail investment products around 3% (1% for the broker, 0.5% for the administration platform and 1.5% for investment management). By paying away so much in fees, you stand to lose 60% of the real return, and effectively half your pension. You should strive to find an RA that charges less than 1% in annual fees.

      Be aware of the flawed distribution model: In South Africa, investment products are sold rather than bought. Investors carry the cost of this sales model. Typically, they are heavily overcharged: distribution absorbs one third and one half of the total fees most investors pay. This includes the broker commission and adviser fees, and sales and marketing expenses incurred by admin platforms and investment managers.

      Brokers purport to conduct a financial needs analysis, in order to select the most appropriate financial product for our needs. But the planning tools are flawed, as they ignore fees and the variability of future returns. By ignoring fees, these tools massively overstate the projected return. Such flawed tools lead to flawed advice, and are of little real value to you.

      Compounding the injury, few brokers propose the most appropriate product – which for you would be a low cost fund with an appropriate investment risk relative to your goal and investment horizon – and instead recommend funds that pay a high commission.

      Reply
  325. August 06, 2012 at 12:43 pm, Mandy said:

    The distinction between retirement fund income and non-retirement fund income

    Our company does not offer retirement fund benefits. On my IRP 5, all my salary income is defined as “retirement fund income” and my bonus is defined as “non-retirement fund income”. Is it correct?

    Reply
    • August 07, 2012 at 9:31 am, 10X Investments said:

      Mandy,

      If your company does not offer a retirement fund (pension or provident), then all your income (not just your bonus) should be classified as non-retirement funding income. The distinction is important, as presently, you may only deduct contributions to an RA from non-retirement funding income (at the rate of 15%). You need to take up this matter with your HR department.

      Reply
  326. August 06, 2012 at 12:02 pm, Mandy said:

    Which deductions apply to your gross retirement funding income?

    My current gross retirement funding income is R490 770 (as per my IRP5). How much retirement fund deductions is allowed?

    Reply
    • August 07, 2012 at 9:23 am, 10X Investments said:

      Mandy,

      Gross retirement funding income/remuneration refers to the remuneration that is considered in determining the contributions that a member or an employer makes to a pension or provident fund. This term also applies to a non-contributory fund where only the employer contributes on behalf of the member.

      The following maximum deduction rates apply: in a pension fund, the employer may deduct 20%, the employee another 7.5%. In a provident fund, the employer may deduct up to 20%, the employee is not allowed a deduction. Individuals may not deduct contributions to a retirement annuity from retirement funding income.

      These rules are set to change in 2014. From 1 March 2014, only the employee may deduct retirement fund contributions at the rate of 22.5% (maximum R250 000) for under 45′s and 27.5% (maximum R300 000 for those 45 and over). The deduction is calculated off the larger of gross salary or taxable income, and applies equally to pension funds, provident funds and retirement annuity funds.

      Reply
  327. July 30, 2012 at 3:09 pm, Mame said:

    Should you cash in your pension if your new employer doesn’t offer pension benefits?

    Hi there,
    I resigned from my previous company. The new one I joined doesn’t offer a pension fund, so what % is going to be deducted if I ask my previous employer to deposit money into my personal account? I need to pay my loans. The amount is R80 000.00.

    Thanks

    Reply
    • July 31, 2012 at 10:12 am, 10X Investments said:

      Mame,

      Preserving retirement savings will soon become compulsory, so that these savings can no longer be diverted for other purposes. Failure to preserve retirement savings on changing jobs is the main reason why less than 10% of South Africans enjoy a “decent retirement” (in the words of our Finance Minister). If your new employer does not offer a retirement fund, you should first consider transferring your savings to either a low cost preservation or RA fund. If you do decide to cash in (and you have not done so before with another retirement fund), then you will be taxed as follows: the first R22 500 is not taxed, the balance to R80 000 will be taxed at 18%, ie you should get about R70 000.

      Reply
  328. July 23, 2012 at 5:03 pm, Tora said:

    What is the aim of the proposed changes to the tax treatment of retirement fund contributions?

    What are the proposed changes to the tax treatment of retirement fund contributions, announced in the budget? The maximum deduction limit of R250 000 a year for taxpayers under 45 years may seem significant, but is it beneficial to all taxpayers?

    Reply
    • July 24, 2012 at 11:54 am, 10X Investments said:

      Tora,

      The proposed changes aim to both strengthen and simplify the retirement savings. To this end, the 2012 confirmed that we are moving to a more uniform savings system, with a standard deduction rate and contribution base, and uniform treatment at retirement for all types of retirement funds.

      Uniform tax treatment: Contribution rates are now capped at 22.5% for people under the age of 45, and 27.5% for those 45 years and older. The contribution base has been set at the higher of employment or taxable income for all fund types. The distinction between pensionable and non-pensionable income thus falls away. Only employees will be allowed to deduct contributions (both employer and employee contributions) to a retirement fund. Employer contributions will be taxed as a fringe benefit, to offset the deduction. These changes will become effective from 1 March 2014.

      Mandatory preservation: One of the stark anomalies of the present system is that members of a pension or provident fund can cash in their savings on changing jobs, but RA members can only do so at retirement (earliest age 55). The proposed changes envisage forced preservation for all types of funds until retirement, but with vested rights protected. This rule may be slightly relaxed for unemployed people who have exhausted their UIF benefits. This still has to be confirmed.

      Compulsory annuities: Presently, members of a pension or RA fund are forced to take out a compulsory annuity (either a guaranteed or a living annuity) with two-thirds of their fund proceeds. Provident fund members can elect to receive the entire amount as a cash lump sum. It is proposed that all fund members will in future be compelled to take out an annuity with two-thirds of their proceeds. Vested rights will be taken into account. This, too, still has to be confirmed.

      The contribution cap in terms of the percentage (22.5% or 27.5%) is more than adequate to provide for retirement. The problem arises with the capped rand amount. This cap serves only the short-term interests of the tax man (limiting tax deductions) and government (introducing populist tax deduction limits on higher earners). But the purpose of retirement saving is to enable investors to preserve their standard of living in retirement, not to achieve an arbitrary minimum standard. If it were otherwise, defined benefit schemes (available to government employees) would not relate pensions to a percentage of final salary, they would provide for a fixed upper limit.

      Other fundamental problems with the contribution cap:

      1. The cap becomes a disincentive to save more than R250 000 pa. This is undesirable for a country with a low savings rate such as South Africa.
      2. Saving outside a retirement fund (for those wishing to save in excess of the cap) invariably becomes more expensive (in terms of product costs), less age-appropriate (in terms of asset allocation), less consistent (in terms of regular contributions) and less disciplined (in terms of accessing savings before retirement).
      3. Individuals do not save consistently through-out their working life – invariably there is an element of catch-up in middle age. Imposing a cap therefore prejudices slow starters (even if the cap increases to 300 000 for over 45’s and older).
      4. In the same vein, individuals with highly variable annual incomes (farmers, for example) will not be able to balance good and bad years (despite roll-over provisions).
      5. In light of the more generous foreign investment allowances for individuals (R4m pa), more savings could end up offshore, especially if the rand should resume its downward trend. Potentially, this would be at odds with prudential guidelines, undermine local investment and hurt the currency even more.
      Reply
  329. July 22, 2012 at 6:08 pm, Francois said:

    Do all financial service providers put your savings vehicles in one “pot”?

    I’ve got 2 retirement annuities. The one is maturing now and is less than R75 000.00 and the other one is maturing in ten years time and is about R40 000. Old Mutual claims that because both are more than R75 000, I can get only one third now.
    Why do they link the two annuities? I am unemployed and when I signed up for this about 25 years ago, my goal was to have the full amount paid out and not only one third. What do the two RA’s have to do with each other as the next one is paying out only after 10 years again. This was not my goal when I originally did my financial planning.

    Reply
    • July 24, 2012 at 10:05 am, 10X Investments said:

      Francois,

      The principle of aggregation applies in our retirement savings law, which means that your total retirement savings are viewed as one pot. If it were otherwise, many of the rules could be side-stepped, and many of the benefits could be duplicated simply by investing in multiple retirement funds/RA’s. This would not be in the public interest. In the same way, one can claim the tax fee cash lump sum portion of R315 000 only once, across all funds, not per single fund. It appears that you were badly advised in this instance, and that your broker was more interested in selling your another RA (thereby duplicating some costs) rather than explaining the law to you, thus enabling you to make an informed decision.

      Reply
  330. July 22, 2012 at 4:29 pm, Jan Broodryk said:

    Does retrenchment affect taxation on your RA?

    I was retrenched and got paid out a lump sum on my retirement annuity. I have to do my tax return now. How will it affect my tax?

    Reply
    • July 24, 2012 at 10:00 am, 10X Investments said:

      Jan,

      It is not clear how your retrenchment, and the pay-out of your RA are connected. The RA is an individual savings product, not connected to your employment. This is true even if you were part of a Group RA. You cannot withdraw from your RA (other than for emigration and ill-health) on retrenchment; you can only retire, from the age of 55 onward (unless your RA balance is R7 000, or less).

      Assuming that you are over 55, and you have retired from your RA, you can claim one-third as a cash lump sum, and with the balance you must purchase an annuity (unless this balance is R50 000 or less). The cash lump sum will be taxed according to the retirement lump sum tax tables, which means that the first R315 000 is not taxed, the second R315 000 is taxed at 18%, the third at 27%, and the balance above R945 0000 at 36%. The RA provider would obtain a tax directive, and deduct any tax due, before paying you out, There should therefore be no more tax due on the cash lump sum you have received. You should have received some correspondence from the administrator, reconciling the value of your savings, the tax deducted and the amount paid out to you.

      Reply
  331. July 21, 2012 at 2:42 pm, Karen said:

    Is it permitted to use your RA as surety for a loan?

    Can you use your RA as surety for a bank loan?

    Reply
    • July 24, 2012 at 9:57 am, 10X Investments said:

      Karen,

      This is not permitted. In terms of S37A of the Pension Funds Act, no benefit provided for in the rules of a registered fund shall be “capable of being reduced, transferred or otherwise ceded, or of being pledged or hypothecated”.

      Reply
  332. July 20, 2012 at 4:22 pm, Axanthe said:

    Defining the “claim” on your full benefit

    I am immigrating to Australia. Does the claim on your full benefit apply to all RA funds? Or just yours?

    Reply
    • July 24, 2012 at 9:53 am, 10X Investments said:

      Axanthe,

      Your question is a bit vague: what “claim” do you mean? In essence, while you are alive, only SARS has a claim against your savings, in the form of tax. From a tax perspective, the Receiver views all your RA savings as one – you are therefore only entitled to one tax-free lump sum of R315 000, not one for every RA you take out. The rules governing RA’s – compulsory annuitisation, restricted access, minimum retirement age of 55 – are set down in our law, and are not specific to 10X.

      Reply
  333. July 19, 2012 at 10:08 am, Cyan said:

    Can a non-resident withdraw his RA upon emigration?

    If you have a non resident who is currently residing and working in South Africa and who contributes to a RA, will they be able to withdraw their RA when they leave the country?

    Reply
    • July 20, 2012 at 2:26 pm, 10X Investments said:

      There is debate on whether the term emigrant/emigration – as interpreted by the SA Reserve Bank – can refer to a foreign national. We are not aware that this issue has been formally decided.

      In terms of the Exchange Control Manual Glossary, “Emigrant” means a South African resident who is leaving or has left the Republic to take up permanent residence in any country outside the CMA. “Resident”, in turn, means any person (i.e. a natural person or legal entity) who has taken up permanent residence, is domiciled or registered in the Republic.

      Your legal status in SA therefore comes into play. If you had permanent residence, then clearly you would fall within the definition. The question of “domicile” is more technical and also involves your intention. However, the term “registered” is quite vague. If you had an official work permit, one can argue you were registered. Similarly, if you had a tax number, you would also have been registered (with SARS). On that basis you could argue that you do qualify for emigration.

      In substance, it would be absurd if such a process was open to South Africans wanting to leave SA, but not to foreigners. In this context, the “emigration” process merely refers to a formal signing-off with the Receiver of Revenue. Assuming that you have a tax number, and paid taxes in SA, and possibly accumulated some assets while in SA (such as an RA), SARS would ensure that your tax affairs are in order, that you have paid all amounts assessed, and you have paid any capital gains tax that may be due on assets you purchased in SA. If satisfied, they will then issue a clearance certificate, and the RA provider should then be free to pay out your RA, after deducting any taxes due.

      It is not clear whether you would qualify for the lump sum withdrawal tax benefit, ie you may well have to pay tax according to income tax tables. This would avoid you obtaining a short term tax benefit by claiming the RA contributions as a tax deduction at your marginal tax rate (say 40%), and then receiving these contributions back a short time later at 0% tax (for the first R22 500) or 18% (for the balance to R600 000).

      Reply
  334. July 18, 2012 at 10:46 pm, Milan said:

    What happens to your RA upon emigration?

    What are the retirement annuity rules for non-South African citizens – when wanting to close the fund?

    I am a foreign national, working in South Africa for the past 2.5 years. I started a RA fund a year and a half ago under the false presumptions that when/if I leave South Africa I would be able to either cash out and close the fund, whilst paying any penalty fees or possibly transfer the funds to another RA overseas.

    My bank said that once my work permit expires and I leave the country I will no longer be able to have an account open. This means I will not be able to fund the RA. Death and disability are not options I would willing choose in order to get the funds. Some advisors seem to think that I would have to go through the emigration process. But it does not look like this process applies to non-South Africans. After all, how can I emigrate from a country that I am not from.

    Please can you advise on whether the points above are true/false. Thanks.

    Reply
    • July 20, 2012 at 2:26 pm, 10X Investments said:

      Milan,

      Please refer to the reply below to answer your question.

      Reply
  335. July 18, 2012 at 11:01 am, Lezette Snyman said:

    Can you cash in your RA before the legal retirement age?

    I have an annuity fund with Old Mutual which I have stopped paying, because the premiums were just getting too high. Is it possible for the fund to pay out a part of the total amount in cash? And can I then open a new annuity fund with the rest of the money?

    Reply
    • July 18, 2012 at 12:43 pm, 10X Investments said:

      Lezette,

      Our law does not permit you to access your RA funds until the age of 55, at which point you may cash in one third. With the balance you must buy an annuity unless the balance is below R50 000. You may however transfer your RA to another service provider and opt for a lower contribution.

      Reply
  336. July 17, 2012 at 10:37 am, Japhta said:

    What is the monthly income I can expect in retirement?

    Hi,
    How will I know how much will I get monthly as per retirement in July 2013?

    Reply
    • July 18, 2012 at 11:33 am, 10X Investments said:

      Hi Japhta,

      If you expect to retire in one year’s time, you should have a good idea of how much money will be in your retirement fund account at that point. The amount, essentially, will be your current balance (you should see this on your latest benefit statement) plus total contributions for the next 12 months. Your money should be in preservation mode by now, ie mostly invested in low risk assets such as bonds and cash that generate a modest but secure return over the next year (probably around six percent over the next 12 months). Add this return to your current balance.

      This will give you a fair idea of how much retirement capital you will have in July 2013. To figure out how this capital translates into a monthly annuity, you need to know the price of the annuity. These prices differ per insurance company and you need to shop around to find the best deal at the time.

      There are different types of annuities – flat or with escalation, single or with a survivor spouse benefit. The cost of the annuity also depends on your gender and your age at retirement. The younger you are, the less you will receive. Annuities for males are also typically cheaper than for females, as the former have a shorter life expectancy.

      To give you an idea where you stand, please make use of the 10X Retirement Calculator. By inputting the required information (essentially your age, gender, target retirement age and your total estimated savings at retirement), it will calculate your monthly annuity amount, ie how much you can expect to receive per month as a SINGLE person (ie without a spousal benefit) if you buy an escalating annuity (growing in line with CPI inflation). If you input your current income, the calculator will also work out your final income replacement ratio.

      Reply
  337. July 10, 2012 at 3:52 pm, Sharon said:

    Does a RA constitute as a compulsory workplace fund?

    1. Do I have a choice against the company’s decision to invest 15% of my salary towards a RA? I would rather choose a pension & provident fund like we used to. This change happened about 6 months ago.
    2. Although the company contributes as one payment to the RA, it is declared as 4001 and 4006 – 2 separate amounts on my IRP5. Is this correct?
    Thanks for your help.

    Reply
    • July 11, 2012 at 2:28 pm, 10X Investments said:

      Sharon,

      A RA – even a Group RA – is an individual savings product, and your company cannot force you to take out an individual savings product. A Group RA merely facilitates payroll deductions and payment to one service provider. You are only required to join a retirement fund if it is a workplace fund (pension or provident fund), you are eligible to join the fund, and you joined the company after the workplace fund was put in place.

      It is not clear from your question whether your employer closed down the pension/provident fund. If that is the case, then obviously these options are no longer open to you. If you want to keep saving for retirement (and not leave your employer), you will then have to save through a RA. But you should be allowed to choose your own RA then, and not be forced to join the RA selected by your employer. You should also have the option to transfer the existing balance in your pension/provident fund to a preservation fund. Be aware though that if you select your own RA provider, contributions may not be facilitated through a payroll deduction. You will have to contribute personally, using after-tax money, and you will only receive the tax break at the end of the year, after you have been assessed for tax.

      As to your second question, you should consult your HR department on this. They apportionment may break the contribution into its savings and risk portions.

      Reply
      • July 11, 2012 at 3:42 pm, Sharon said:

        thanks for the reply.
        1. Yes the Pension & provident fund was discontinued altogether, and the company has now chosen a RA for us to contribute towards.The reasoning for choosing a RA rather than the old way of Pension/Provident given is “with the primary goal to foster a savings culture that will provide the best returns on the investment to the employee, and that takes into account the changing face of the whole retirement funding transformation that is taking place and being driven by the government”. I somehow cannot come to terms with this as the government has not finalised this as yet. So my question again is, Can I say to the company that until the government has finalised this issue I would prefer for the old way of pension and provident and not RA. The RA has being in effect since November last year. I have taken a full withdrawal of my previous pen/prov funds.
        2. I will sort out with HR as I don’t understand the split on my IRP cos’ it is just one RA fund. Thanks again.

        Reply
        • July 11, 2012 at 4:50 pm, 10X Investments said:

          Sharon

          With all due respect, your employer’s justification to move to an RA is absurd and makes no sense. Yes, one can argue that RA’s are presently more restrictive than work place funds in that you can only access your savings at age 55 (you can withdraw from a workplace fund at any age on changing jobs), and thus enforce a better savings culture. But by the same token, contributions to an RA are voluntary whereas contributions to a workplace fund are compulsory (for joining employees at least), so members can stop saving whenever they want to. So moving to an RA does not automatically foster a better savings culture.

          As regards the “best return on the investment”, your investment returns are not determined by the type of fund you choose (RA or pension or provident), but by your underlying asset allocation, the investment style used by the fund (active or passive) and the fees you pay. More often than not, pension/provident funds provide far better returns simply because their (group) fees are lower than for an (retail) RA fund. Over a long investment term, fees have a huge impact on the investment outcome. Do you know what fees you are paying in the RA versus your previous fund? Do you know how much of your contribution is invested and how much goes towards risk cover? You should have been told these important details.

          Government’s retirement reform is focused on providing simple default solutions, lowering fees(1), forced preservation, limiting broker commissions, and forced annuitisation at retirement for all types of funds. These reforms will also apply to exiting provident funds (although vested rights will be preserved); if was thus completely unnecessary to change fund types, to fall in line with the proposed reforms.

          Unfortunately you cannot force your employer to undo this decision, and start up a new pension/provident fund. But it does not appear that he has acted in his employee’s best interests.

          Reply
  338. July 10, 2012 at 3:18 pm, Jenny Adams said:

    Should I invest in a RA or a pension preservation fund?

    My pension fund was transferred to a RA without my knowledge. I was uninformed that my pension fund was being transferred to a pension preservation fund. How do I get this rectified?

    Reply
    • July 11, 2012 at 2:22 pm, 10X Investments said:

      Jenny,

      A RA ties up your money until you are 55 whereas a preservation fund does give you the option to make one full or partial withdrawal before hand. In other words, a preservation fund is more flexible, so this is a potentially serious error. RA’s – especially life company RA’s – are also notoriously expensive, and may even deduct commission expenses for as service you neither requested nor received. Your administrator requires (and must wait) for your specific instructions, before transferring or paying out your retirement fund (unless the rules of the pension fund provide otherwise). If the administrator has acted contrary to (or without) your instruction, then they need to rectify the situation with RA service provider, clarify the matter with SARS on your behalf, and reimburse you for any costs you may have incurred as a result of the incorrect transfer.

      Reply
  339. July 09, 2012 at 4:36 pm, Maria Holmes said:

    Is it permissible to commute a lump sum from a RA prior to retirement?

    Hi there. I am in the insurance industry and was under the impression that if my RA fund value is under R7 000 I do not have to wait until age 55 – I can take that money out now. Please advise further, thanks.

    Reply
    • July 11, 2012 at 2:15 pm, 10X Investments said:

      Maria,

      You are correct. In terms of the Taxation Laws Amendment Act No 3 of of 2008, it is permissible to commute a lump sum from a retirement annuity fund prior to retirement, if the amount less than the stipulated minimum, as determined by the Minister by notice in the Gazette. The Gazetted amount is currently R7 000.

      Reply
  340. July 04, 2012 at 2:36 pm, Dinah Gibbon said:

    How is the “tax bill” on your pension calculated?

    Thanks for your email. My divorce pension was 50% of my ex pension. The amount was R230 000. How much percent will SARS then take? Is it after the first R22 500 or in total? And even if you don’t have work, can they still make you pay tax on it? I am still young.
    Thanks
    Dinah

    Reply
    • July 06, 2012 at 2:23 pm, 10X Investments said:

      Dinah,

      If you withdraw your share of the pension (and assuming you have not withdrawn from a pension before), your likely tax bill will be R37 500, ie you would get out R192 650. Your tax bill is calculated as follows: (R230 000 – R22 500) x 18%. The tax is charged irrespective of your age or current work situation. Please be aware that these lump sum benefits are available only once, ie should you withdraw from another pension or provident in future, you cannot claim the tax free-portion again, and the 18% lump sum tax rate is available only on a further R370 000.

      Reply
  341. July 04, 2012 at 9:23 am, Dinah Gibbon said:

    How will SARS tax you on your pension?

    Good day,

    I want to know if SARS has the right to take a lump sum of my pension that I got from my divorce. If so, how much at present? My ex works for the SADF. Why I ask is because I have no work. Thanks

    Reply
    • July 04, 2012 at 11:57 am, 10X Investments said:

      Dinah,

      SARS will tax your portion of the pension money. If you are withdrawing from the pension fund that holds your share of the money (or if you are withdrawing at the time the pension fund is split), then the first R22 500 paid out to you is tax free, the balance to R600 000 is taxed at 18%, the balance to R900 000 at 27%, and the remainder at 36%. If you are over 55, you can also officially retire from the fund. In that case, the first R315 000 is paid out tax free, the second R315 000 is taxed at 18%, the third at 27% and the remainder (above R945 000) at 36%.

      Reply
  342. July 03, 2012 at 12:33 pm, Beverley Labuschagne said:

    When contributing to a RA, do you get cash out when submitting your tax return?

    I thought if you contribute to a RA you would get some cash out when submitting your tax return. I pay R1 000 a month and only got 50c back.

    Reply
    • July 03, 2012 at 1:40 pm, 10X Investments said:

      Beverley,

      The allowable RA deduction is presently based on the following formula: the greater of 15% of your non-pensionable income, R3 500 less allowable pension fund contributions, and R1 750. So if you pay into a pension fund at work as well, there is a chance that all your work income is deemed to be pensionable, and you will not be allowed a further deduction against this income for your RA other than the R1,750 minimum. Alternatively, if you pay into a group RA scheme (through your work), your PAYE deduction may already include the RA tax deduction.

      Reply
      • July 04, 2012 at 10:26 am, Nevin said:

        How much are you allowed to deduct of your non-pensionable income in respect of your RA contributions?

        I would like join 10X and my plan is to contribute R1 000 a month. I do not belong to any employer pension fund or any other retirement fund. My non-pensionable salary is R400 000 pa. How much should I expect from the tax man in such a situation?

        Reply
        • July 04, 2012 at 12:05 pm, 10X Investments said:

          Nevin,

          You are presently allowed to deduct 15% of your non-pensionable income in respect of your RA contributions. As you do not belong to a work place fund, all your income is deemed non-pensionable. Your marginal tax rate at R400 000 pa income is 35%. If you contribute R1 000 pm, or R12 000 per year, you should get back R4 200 from SARS (R12 000 x 35%).

          Reply
  343. July 02, 2012 at 6:46 pm, Ross Gardiner said:

    Important terms in your Tax Notice of Assessment

    I contributed R78k in the 2012 tax year to a RA.
    In my tax notice of assessment, the amount being carried over to 2013 is R121k. What does that mean?

    Reply
    • July 03, 2012 at 11:09 am, 10X Investments said:

      Ross,

      This probably refers to the contributions not deducted got tax in prior years. These can be claimed in future years, or claimed as tax free cash lump sum at retirement.

      Reply
  344. July 02, 2012 at 4:51 pm, Carina Strydom said:

    How are you taxed on capital intended to contribute towards a retirement fund?

    ?
    I am nearly 60 and want to know if I sell my plot and I want to transfer the proceeds to a retirement fund, how will I be taxed on this income that comes to me if the land is sold.

    Reply
    • July 03, 2012 at 1:45 pm, 10X Investments said:

      Carina,

      If you sell your plot, that income will be deemed to be capital rather than income. It will be taxed according to the capital gains tax tables. Unfortunately, you cannot set off a retirement fund contribution against capital, only against income, so you cannot reduce your potential capital gains tax liability by making a lump sum contribution to a retirement fund. Any income earned by your retirement fund is not taxed while you are a member of the fund.

      Reply
  345. June 29, 2012 at 9:56 pm, Dawn said:

    Can you leave the cash in your RA past the age of retirement?

    Do I have to cash in my retirement annuity at the age 55years or can I leave it for longer?

    Reply
    • July 03, 2012 at 11:13 am, 10X Investments said:

      Dawn,

      You can leave the cash in your retirement annuity for as long as you want.

      Reply
  346. June 25, 2012 at 12:51 pm, Christine said:

    When does “retirement” cash lump sum tax apply?

    I have a retire annuity which’s retirement date is Oct 2012 for R35 000. I am 55 years old. Can I take the entire R35 000 or do I have to take a third? And do I have to pay tax on this? I am still working and this is a retirement plan I stopped years ago.

    Reply
    • June 25, 2012 at 4:13 pm, 10X Investments said:

      Christine,

      As your RA fund balance is likely to be less than R75 000 at your “retirement” date in October 2012, you will be able to claim the entire amount as a cash lump sum. “Retirement” cash lump sum tax will apply – this provides that the first R315 000 of any cash lump sum received on retiring (not withdrawing!) from retirement fund is not taxed. The R315 000 is reduced by any tax-free lump sums you may have received in the past from another retirement fund.

      Reply

/h3>
Page 1 of 2012345...1020...Last »