Topping up your Retirement Fund can afford you great tax benefits. Deductible contributions are limited to 27.5% of the higher amount of your wages or taxable income, up to a maximum of R350,000.00 per year. The calculation can be technical, and it is advisable to consult a professional if you need help.

Benefits of contributing to a retirement fund include the following:

1.) Contributions towards a retirement fund can reduce your taxable income when it is necessary, which means more cash flow for living expenses.

Any unused contributions can be extended and used during or after retirement.

2.) The growth within the fund is taxed at 0%, this means that any dividend withholding tax, capital gains and earned interest are accumulated in the fund and are not reduced by tax. The investment value may potentially be higher than that of a long-term discretionary mutual fund in the long run.

3.) It is important to note that after you retire, your retirement income will be taxable in your hands. The retirement fund will not be included in your pool of entitlements. Benefits assigned in previous tax years can be part of your taxable assets.

4.) A retirement annuity will not form part of your dutiable estate. However excess contributions not allocated in the previous tax years can form part of your dutiable estate.

In the event of the member’s death, survivors or beneficiaries have several options.

5.) A member only has access to the funds at the age of 55. Locked in – except in case of formal emigration from South Africa, disability or when the total value of the fund is less than R7,500, this ensures that retirement assets are only used upon retirement.

For more advice on how to save for your retirement, it is a good idea to contact your financial advisor. The above should not be considered financial advice, always consult with an expert.