Retirement Planning


Planning for one’s retirement should be high on the financial priority list, as we get older, our time to retirement decreases while our income increases. It is for this reason that we see retirement planning as vital in the financial planning process and there should be constant focus on the progress of the goals set.

Options for Retirement investments

There are 3 investment options for Retirement planning:

Pension Fund

This option is usually found in the workplace and arranged by your employer, where you as employee contributes a percentage to the fund and your employer contributes a percentage to the fund on your behalf. At retirement you are entitled to 1/3 cash lump sum and the other 2/3 are invested to purchase an income for you.

Provident Fund

This option is similar to a Pension fund and is set up by your employer, the main difference is that when you withdraw form this fund at retirement, you are entitled to take the complete fund value as a lump sum.

Retirement Annuity

This option is for those who has no pension/provident fund set up at work or to supplement your pension/provident funds should it be insufficient. The law’s and tax implications on RA’s are exactly the same as for that of Pension Funds. 1/3 Lump sum, 2/3 invested to purchase an income.

Tax benefits and implication on Retirement investments

As from 1 March 2016, individual tax payers can contribute 27.5% of their gross income towards any of the 3 retirement options mentioned above, the contributions are tax deductible up to a limit of R29 000 p/m or R350 000 p/a.

All the tax benefits on the 3 options are in the hands of the individual tax payer.

If an individual leaves their place of employment where a pension or provident fund was present, that person has 2 options: One can chose to let the fund balance pay out to them, there will be tax implications on this option subject to tax tables applicable at time of withdrawal. The other option is to transfer the fund balance from the current pension or provident to a Preservation Fund, in which case there will be no tax implications. An individual is entitled to 1 withdrawal from a Preservation Fund but the withdrawal will be subject to tax as applicable at the time of withdrawal.

Upon retirement 1/3 lump sum can be taken in cash, this 1/3 will be subject to tax as applicable at the time, the rest of the 2/3 must be taken to purchase an income and will be taxed at income tax levels applicable at the time.

Do not save what is left after spending, but spend what is left after saving.Warren Buffet

Invest in the future because that is where you are going to spend the rest of your life.Habeeb Akande

Unsuccessful people make decisions based on their current situation; successful people make decisions based on where they want to be.

Know what you own, and know why you own it.Peter Lynch


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