A Retirement Annuity (RA) offers a variety of powerful benefits, making it one of the most efficient ways to save for your future. Here’s a breakdown of some key advantages:
1. Tax Benefits
Tax-deductible contributions: You can deduct your RA contributions from your taxable income—up to 27.5% of the greater of your salary or taxable income, capped at R350,000 per year. This means your contributions can help serve to lower your taxable income, and in some cases, lower your tax bracket.
Tax-free investment growth: Any interest, dividends, or capital gains earned within your RA are tax-free, allowing your investment to grow faster without incurring taxes.
2. Estate Planning
Exclusion from estate duty: The assets in your RA don’t form part of your estate for estate duty purposes, which means they’re not subject to executor fees or estate duty tax.
Protection from creditors: Your RA assets are protected from creditors, giving you peace of mind that your savings are safe.
Nomination of beneficiaries: You can nominate beneficiaries for your RA, ensuring a smooth and direct transition of these assets outside of your estate.
3. Flexibility with Excess Contributions
Carry forward unused contributions: If you exceed the annual contribution limit, don’t worry! You can carry the extra amount forward to future tax years and still benefit from the tax deductions later.
Retirement lump sum deductions: When you retire, any excess contributions that didn’t qualify for deductions in the past can reduce the taxable portion of your retirement lump sum, giving you another tax break.
Additional Benefits of the EasyEquities RA
The EasyEquities RA offers unique advantages, tailored to give you maximum flexibility and control over your retirement savings:
1. Investment Choice Flexibility
You can structure your RA to suit your personal needs by choosing from a range of Regulation 28-compliant investment options.
There are 31 different investment products to choose from, with risk and return profiles to suit all investors, including (but not limited to) money market, balanced, conservative, moderate and high equity.
EasyEquities is product-agnostic, meaning you can invest in unit trusts from top asset managers like Allan Gray, Satrix, Coronation, NinetyOne, and more, plus EasyAssetManagement’s own managed bundles.
You also have access to both local and global investment exposure, giving your portfolio international reach.
2. Digital Access and Control
Manage and monitor your RA anytime, anywhere, through EasyEquities’ web and mobile app. This gives you total control over your investments and ensures transparency in how your RA is performing.
3. Low, Transparent Fees
The fee structure of the EasyEquities RA is designed to be affordable and fully transparent, meaning you won’t have to worry about hidden costs eating into your returns.
4. No Minimum Contributions or Initial Lump Sum
There are no minimum contribution requirements. You can start with whatever amount you’re comfortable with, and there’s no need to make a large lump sum deposit upfront.
5. Seamless Integration with Your Other Investments
You can view and manage your entire investment portfolio in one place, making it easier to keep track of your finances and retirement planning.
6. Flexible Contributions
Whether you want to pause, reduce, or increase your contributions, there are no penalties. You’re free to contribute as much as you like, when you like.
7. Smooth Transition to a Living Annuity
When you choose to retire (from age 55) from the EasyEquities RA, you can seamlessly transition to the EasyEquities Living Annuity, which allows you to continue managing your retirement savings. The Living Annuity is not subject to Regulation 28, giving you even more investment flexibility, including the option to invest in individual stocks and ETFs.
8. No Set Investment Term
With an RA, there’s no fixed investment term, allowing you to invest at your own pace until you retire.
Limitations of Retirement Annuities (RAs)
While RAs come with numerous benefits, it’s important to understand the limitations:
RAs cannot be used as collateral: Your RA investment cannot be used to secure loans or other debts.
Investment limits due to Regulation 28: You can’t invest heavily in certain types of investments like individual stocks or exceed offshore investment limits.
Limited pre-retirement access: You can only access a portion of your Retirement Annuity (your Savings Pot allocation) once per tax year before retirement, with some exceptions.