Question:
Good day I would like to know if its ok or advisable for me to take out a retirement annuity when I already have a provident fund and pension fund with Alexander Forbes. Please advise
Answer:
Rudzani, An retirement annuity is a retirement fund for individuals who do not have access to a workplace retirement fund (such as a pension or provident fund), or who earn substantial amounts of non-pensionable income and wish to top up their retirement savings or claim further tax-deductible contributions. You can claim retirement annuity contributions up to 15% of your non-pensionable income. So, if you earn a substantial amount of non-pensionable income (eg bonuses and commissions which are not pensionable), you can consider a retirement annuity. Be aware though that a retirement annuity is not very flexible - you can't cash it in before the age of 55, and you must use two-thirds to buy an annuity. Some life company retirement annuities are also very expensive. So if you do not have non-pensionable income and you merely want to save more, you should rather consider topping up your pension and/or provident fund first. You may claim contributions to a pension fund up to 7.5% of your pensionable income. Or you could ask your employer to increase their contribution to your pension or provident fund (by way of a salary sacrifice).
