The retirement annuity decisions that matter most

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Your investing journey will involve plenty of decisions around your retirement annuity as you move through the years. As an investor, it can be easy to be distracted by short-term market volatility and the noise that likely arises along the way. However, in reality, there are actually only a few key decisions that you need to focus on, along with sticking to your long-term financial plan and goals.

These factors include your investor behaviour, asset allocation, fees, and contribution consistency. In this article, we will take a more in-depth look at the key factors you should focus on with your retirement annuity in order to improve your long-term retirement outcomes.

What is a retirement annuity?

A retirement annuity (RA) is a long-term retirement investment vehicle designed to help you save for your retirement years whilst also offering attractive tax deductions. From the 1st of March 2026, regulations state that contributions are tax-deductible up to R430,000 and a maximum of 27.5% of your salary per annum.

All growth within your retirement annuity is tax-free, allowing more of your returns to be reinvested and to potentially grow and compound over time. From age 55, you will be able to move your retirement annuity across to an annuity of your choice. This annuity will provide you with an income for your retirement years. This will be either a life annuity or a living annuity.

Decision 1: How much you contribute

The amount you decide to contribute is an important choice you, as an investor, need to make. This is an area that you have control over, so it should be carefully thought through. It is important to be consistent and to start early with these contributions. You can contribute via a debit order or lump-sum payments, depending on your preferences.

This can be amended to cater to changing financial circumstances. It’s generally a smart idea to increase your contributions to your retirement annuity as your income grows. If you do receive a bonus or any additional income, consider investing this in your retirement annuity. The earlier you start investing, the more you stand to benefit from potential compound growth over time, too.

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Decision 2: Your asset allocation

Your asset allocation plays an important role in determining the growth of your RA, so careful thought should go into the mix of different asset classes that you decide to invest your capital in within your retirement annuity “wrapper”.

The mix of different classes that you would select from includes: equities, real estate, bonds and cash. Asset allocation plays the biggest role in the performance of your retirement annuity, accounting for over 90% of returns, as seminal research from Brinson, Singer and Beebower shows. At 10X, you will be able to adjust your underlying portfolio by choosing from a selection of carefully designed investment funds, each with a different mix of assets and geared toward different investor profiles.

You can expect equities to generate strong returns over the long term, whilst also being the most volatile of the asset classes. As data suggests, equities have historically produced returns above inflation by around 7% annually, over the long term (based on JSE All Share Index performance versus CPI from 1960-2020), although past performance does not guarantee future results. Real estate will also produce some solid returns while serving as a hedge against inflation. Bonds will add stability to your portfolio whilst also producing some lower returns. Cash is the most stable of the asset classes, albeit the likeliest to generate the lowest returns of all the asset classes.

When you consider your ideal asset allocation, you would want to focus on your risk tolerance levels and investment timelines. Your risk tolerance levels look at your appetite for risk and how risk-averse you are. You would also align your asset allocation with your long-term financial goals and plans. This is important to ensure that your portfolio balances both risk and return, ensuring that your portfolio includes some growth assets to target growth in the long term.

You may also like to include some offshore exposure in your portfolio. This may be a good hedge against any volatility that may occur in South Africa, as well as any depreciation of the Rand which may occur. RAs are subject to Regulation 28 of the Pension Funds Act. This legislation places a cap on the percentage of your retirement annuity that you may invest in equities and offshore. Current regulations allow you to invest up to 75% in equities and 45% offshore. At 10X, our funds are well-diversified across the asset classes, including both local and offshore assets, offering investors a variety of different funds to suit their particular needs and situation. Please visit our funds page for the most up-to-date fund information.

Decision 3: The fees you pay

Lower fees may mean that you have more returns available to reinvest in your RA, potentially allowing it to grow and compound over time. Higher fees may mean that less of your returns is available to be reinvested and grow over time.

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There are some typical fees that you may see deducted from your RA. These are the following fees:

• Management fees: These are the fees charged for the running and management of the fund.
• Administration fees: These will be administration-related, such as reporting and compliance, so you can expect fees to be charged for this.
• Advisor fees: An advisor will provide you with advice and possibly other services, which they will likely charge both an initial and an ongoing fee for.

Let’s look at an example to illustrate the effect of fees of 3% versus fees of 1%: We will assume the following information for our example:

Investment period of 30 years

Initial lump sum investment of R50,000

Monthly contributions of R2,000

Return of 12% per annum

An inflation rate of 6%

Example 1 (1% Fees): Real investment value is approximately R1.8 million

Example 2 (3% Fees): Real investment value is approximately R1.3 million

As you can see in this example, a difference of just 2% can have an impact on your final investment values. This example is for illustrative purposes only, and real results may vary. You can find out more about how fees impact retirement outcomes here.

The Effective Annual Cost (EAC) is a standardised metric which ASISA introduced in 2015. This useful metric will allow you to see all of the fees and costs that are associated with owning an investment product over one year. All else being equal, you may see that a higher EAC would result in fewer returns being available for reinvestment. If you compare this to a lower EAC, which may mean there are more returns available to be reinvested and potentially compound over time. The EAC should be just one factor to consider when comparing service providers.

We charge low fees at 10X, which are transparent and simple to understand. Fees that are charged on retirement products are usually 1% or less, depending on the product chosen and the amount invested. Please explore our products for the most up-to-date fee information. Fee information is correct as of 5 June 2026.

Decision 4: How you behave during market volatility

Investor behaviour, especially during times of market volatility, can also have a significant impact on your retirement annuity. It is expected that there will be times of market volatility when it comes to your investing journey, so it is important that you are able to manage your investor behaviour and avoid reacting emotionally or making any emotional decisions.

If possible, you should avoid switching funds during this time, as switching to more conservative funds may lock in any losses incurred in your equity funds. Your focus should remain on the long term and your financial and investment goals. Short-term market noise should not be a distraction; remain disciplined and consistent in your retirement annuity investing.

Decision 5: Whether you stay focused on the long term

A retirement annuity is a long-term retirement investment product, so the money is expected to remain invested for a long time to potentially grow and take advantage of the benefits of compound growth.

For these reasons, it’s important to remain patient and keep your focus on your long-term plans and goals. You should avoid being distracted by any short-term market noise that is bound to occur and instead keep your attention on the far horizon. This, coupled with a consistent and disciplined approach to your contributions, will allow compound growth to work its magic over time and ultimately improve your long-term investment outcomes.

Let’s look at an example to illustrate the profound effect of compound growth and consistent investing:

Scenario 1: You decide to invest a R100,000 lump sum and generate a 6% real return over 30 years.

Scenario 2: You decide to invest a R100,000 lump sum and also include a debit order of R1,000 per month for 30 years, which also generates a 6% real return.

In Scenario 1, you end up with approximately R482,000.

In Scenario 2, you end up with approximately R1.5 million.

Even a small, regular debit can grow significantly when compounded over 30 years, which could make a meaningful difference to the amount you have available for retirement. Increasing your monthly contributions over time can also accelerate compound growth. This example is for illustrative purposes only, and actual results may vary.

What is the Two-Pot Retirement System

The Two-Pot Retirement System was implemented in September 2024 in South Africa. This system has changed the way that both contributions and withdrawals to and from retirement products are now dealt with. You will now notice that all contributions to retirement products are now split between two pots, namely: a ‘retirement pot’ and a ‘savings pot’. There is also a third pot, which is called the ‘vested pot’: The vested pot is for all savings that have accumulated prior to September 2024 and the start of the Two-Pot Retirement System and remains governed by the old rules.

Withdrawals from the savings pot are allowed, as long as you adhere to the stipulated rules. You may withdraw once per year, for a minimum amount of R2,000. These withdrawals are taxed at your marginal tax rate, and there is also an administration fee included. The savings pot funds should, however, ideally remain invested, and withdrawals should be avoided if possible.

Any contributions to your retirement annuity will be split between the retirement pot and the savings pot. One-third of contributions will be allocated to the savings pot, and two-thirds will be allocated to the retirement pot. The retirement pot can only be accessed upon retirement, where it will then be used to purchase an annuity of your choice. Please consult the latest FSCA guidance for the most up-to-date information on the Two-Pot Retirement System. H2: How these decisions work together The decisions you make regarding your fees, asset allocation, contributions, and investor behaviour all work hand in hand. These factors work together and have a cumulative impact on your long-term retirement outcomes. For example:

1. Strong investment returns can be eroded by high fees: Even if your portfolio performs well, excessive fees can reduce the amount of growth that remains available for reinvestment and compounding over time.
2. Consistent contributions can be undermined by the wrong asset allocation: If you contribute regularly but your portfolio is invested too conservatively and heavily weighted towards cash, you may not generate the level of growth needed to meet long-term retirement goals.
3. A well-structured portfolio can be compromised by poor investor behaviour: Reacting emotionally during periods of market volatility, switching funds unnecessarily, and attempting to time the market can negatively impact retirement outcomes.
4. Low fees and a suitable asset allocation are most effective when paired with consistency: Regular contributions and a disciplined long-term investment approach allow your strategy to benefit from the effects of potential compounding over time.

All of the decisions that you make regarding these different factors over time can impact the potential long-term growth of your retirement annuity, so these should be carefully considered. They may not seem that important when viewed in isolation, but when viewed as a whole over time, you want to ensure that good decisions are made consistently.

Final thoughts: Focus on the retirement annuity decisions that matter most

When it comes to your retirement annuity investment strategy, your focus should ideally fall on the decisions that matter the most over time. The most important areas would be fees, asset allocation, consistent contributions and your behaviour as an investor, especially in times of market uncertainty. Ensuring your focus remains on these areas may lead to better long-term retirement outcomes. It’s important to be clear about your long-term investment strategy and review it annually to ensure it still serves you. Once you are clear on this, it’s important to stay consistent and disciplined with these goals. Get in touch with the experienced investment consultants at 10X if you have any queries surrounding your retirement annuity!