by Martin de Bruyn, CFP, CFA

With the end of the 2021/2022 tax year looming, now is the time to boost your savings by investing in a Retirement Annuity (RA) before February 28, 2022.

Investing in an RA not only helps to reduce your taxable income, but also ensures that you do not miss out on tax benefits that may not be carried over to the next year.

It is important for individuals to be aware of how they can benefit from tax laws designed to encourage savings. When investing in an RA, you can enjoy a tax rebate that you can claim as a refund. However, we advise that you should preferably reinvest the refund to boost your retirement savings.

An RA, pension fund or provident fund contribution allows you to invest up to an annual amount of 27,5% of your taxable remuneration or income, whichever is the greater. However, this benefit is tax-deductible up to an amount of R350 000 annually. The investment returns on your RA contributions are free of dividends tax, income tax on interest and capital gains tax.

If you have not reached the annual contribution limit, you still have a chance to increase your contributions before the end of February. When you contribute to an RA, you defer some of your taxable income to the period after retirement where your income tax rate will likely be lower.

Source: Sanlam