Question:
Hi there, I wanted to find out whether i should start contributing to an retirement annuity even though I have a provident fund with my employer. The provident fund contributions are made by my employer only and are calculated at 10% of my package excluding a 13th cheque (bonus). If i start contributing to an retirement annuity would i be able to claim a portion of the contributions as tax deductible? And if so what would be the maximum? Thanks..Michael
Answer:
Ideally, you should be saving 15% of your income over your entire working life. It would serve you better if you added this contribution to your provident fund. Can you get your employer to contribute more by way of a salary sacrifice (to get the tax deduction)? This higher contribution rate must however be permitted by your special fund rules.
Alternatively, you can take out a retirement annuity.
You may deduct up to 27,5% of your gross remuneration or taxable income (whichever is the higher) in respect of your total contributions to a pension, provident or retirement annuity fund, subject to an annual limit of R350 000.
