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Guide5 min read

What is a Retirement Annuity? A Simple Guide for South Africans

A Retirement Annuity (RA) is a savings account for your retirement. But unlike a normal savings account, it gives you a big tax break. The government rewards you for saving for retirement by charging you less tax. Here is how it works in plain language.

Key Takeaways

  • An RA is a long-term savings plan for retirement
  • You get a tax break on the money you put in (up to 27.5% of salary)
  • You cannot take the money out until you are 55
  • Anyone can open one — you do not need an employer
  • It is one of the best ways to save tax AND save for the future

How does an RA work?

You choose an amount to save each month (or once a year). This money goes into an investment fund that grows over time. The big benefit is that SARS lets you deduct your RA contributions from your taxable income. This means you pay less tax every month.

  • You choose how much to contribute (even R500/month helps)
  • The money is invested in funds that grow over time
  • You pay less tax because contributions are deducted from taxable income
  • The investments grow tax-free inside the RA
  • You access the money when you turn 55 (or later)

How much tax do you save?

The tax saving depends on your salary and how much you contribute. You can deduct up to 27.5% of your salary, with a maximum of R350,000 per year. The higher your tax bracket, the more you save.

  • Earning R20,000/month and contributing R2,000 = save about R360/month in tax
  • Earning R40,000/month and contributing R5,000 = save about R1,550/month in tax
  • Earning R60,000/month and contributing R8,000 = save about R2,880/month in tax
  • Use our calculator above to see your exact saving

Who should get an RA?

An RA is good for almost everyone, but especially for these people:

  • Freelancers and self-employed people (you have no company pension)
  • People whose employer does not offer a pension fund
  • Anyone who wants to pay less tax right now
  • People who want to save more for retirement on top of their pension
  • Even if you have a pension fund, you can still get an RA for extra savings

What are the rules?

There are some important rules to know before you open an RA:

  • You cannot take the money out before age 55 (with some exceptions)
  • When you retire, you can take 1/3 as cash (first R550,000 is tax-free)
  • The other 2/3 must buy an annuity (monthly income for life)
  • If you emigrate, you can access it after 3 years
  • If your RA is worth less than R247,500, you can take it all as cash

Where to open an RA

You can open an RA at most banks and investment companies in South Africa. Some popular options:

  • Allan Gray (well-known, good track record)
  • Sanlam (big SA insurance company)
  • 10X Investments (low fees, simple)
  • Old Mutual (large, established)
  • EasyEquities (low minimum, app-based)
  • Compare fees carefully — even 1% difference matters over 20+ years

Ready to see your own numbers?

Use the RA Tax Benefit Estimator