Why You Should Invest In An RA

Once you stop working, you will still need to have a guaranteed income that will cover your monthly living expenses. This will be classified as your retirement capital.

With the cost of living on the rise, along with inflation, exposing your retirement capital to the market could potentially mean long-term growth.

So, what is an RA exactly?

A retirement annuity fund (RA) is a tax-efficient vehicle in which you invest prior to retirement, in order to have enough money during retirement. It is an ideal way to supplement your existing pension or provident fund.

A few benefits of having an RA include:

·       You may retire from the Fund from the age of 55. When you retire, you will be entitled to take up to one-third of the fund value in cash — a portion of which may be tax free
·       You build up enough capital to sustain you during retirement
·       Multiple tax benefits (no income tax, no capital gains tax and no dividend withholding tax is applied within the fund)
·       Although you have limited access to your money until the age of 55, this restricts any pre-retirement spending
·       A portion of the contribution made by the member is tax deductible
·       Your money is protected should you become insolvent, as your creditors cannot seize the fund benefit
·       You can continue contributing to the retirement annuity should you change jobs
·       On death, beneficiaries will have immediate access to the retirement annuity benefits, as an RA does not form part of your estate

Tax regulations

A portion of your contributions are tax deductible:

•         From 1 March 2016, all members who contribute towards a retirement fund (pension, provident fund or retirement annuity), will qualify for a tax deduction on contributions of up to 27.5% of the greater of remuneration or taxable income.
•        The deduction above will be capped at R350 000 per year which means, for individuals earning more than R 1.27 million, there will now be a limit as to how much of their retirement contributions are tax deductible.
•        Contributions which employers make into retirement funds are now be seen as a fringe benefit and will be taxed in the hands of the member.
·       Any growth on the capital value of your units is currently tax-free. No local dividend tax or tax on interest is charged to retirement annuities

 Reminder: New business cut-off for submission is the 28th February 2018 at 13H00.

February 03 2018 By Noble Wealth Management Financial Planning