FAQ
How are your preservation fund benefits taxed?
Source: South African Revenue ServiceAnnuity payments are taxed as income, according to the personal income tax tables.
Who should consider using a preservation fund?
You should consider a preservation fund if you are withdrawing from a pension or provident fund (due to resignation or retrenchment) and you wish to preserve your savings as well as the tax benefits attached to those savings.
What is a preservation fund?
A preservation fund is a retirement fund in terms of the Pension Funds Act. It is a tax effective investment vehicle designed for individuals who wish to invest the proceeds of their company-sponsored retirement plan in a tax-efficient manner.You may transfer the proceeds of your pension or provident fund to a preservation fund in the event you are dismissed, retrenched, or you resign. Doing so preserves both your accumulated savings and the attached tax benefits. You can invest the proceeds from different pension or...
Can my employer contribute to a retirement annuity on my behalf?
Yes. The employer can either contribute to the RA on the member’s behalf, or deduct such contributions from the employee’s pay. If the employer makes the contribution on behalf of the employee then this will attract fringe benefits tax that must be recovered from the employee. In both cases, the employee can claim these RA contributions for tax, up to a maximum of 27,5% of gross remuneration or taxable income (whichever is the higher) subject to an annual deduction cap of R350,000.
What is a retirement annuity?
A retirement annuity (RA) is a retirement fund in terms of the Pension Funds Act. It is a tax-effective investment vehicle designed for individual investors (as opposed to employees who contribute to a workplace retirement fund). A retirement annuity is ideal for people who:- are self-employed;- don’t have access to a work-place pension or provident fund through their employer;- want to supplement their pension or provident fund savings;- earn significant amounts of non-pensionable income (e.g. interest and renta...
