Question 1

What is the maximum RA contribution I can deduct from tax?

Accepted Answer

You can deduct up to 27.5% of your taxable income or remuneration (whichever is higher), subject to an annual cap of R350,000. This limit is shared between all retirement fund contributions — RA, pension fund, and provident fund combined. Any excess contributions can be carried forward to future tax years.

Question 2

How does the RA tax deduction actually work?

Accepted Answer

Your RA contribution reduces your taxable income. For example, if you earn R500,000 per year and contribute R60,000 to an RA, your taxable income drops to R440,000. The tax saving equals the contribution multiplied by your marginal tax rate. At a 31% marginal rate, a R60,000 contribution saves you R18,600 in tax (R1,550 per month).

Question 3

Can I have an RA if I already have a pension fund at work?

Accepted Answer

Yes, absolutely. Many South Africans use an RA to top up their retirement savings beyond what their employer's pension fund provides. The 27.5% deduction limit is shared, so your combined pension fund + RA contributions are deductible up to that limit. If your pension fund contribution is below 27.5% of your income, you have room for additional RA contributions.

Question 4

What happens to my RA if I lose my job?

Accepted Answer

Nothing — your RA is completely independent of your employer. Unlike a pension fund (which you must deal with when leaving a company), your RA continues unchanged regardless of your employment status. You can continue contributing, reduce contributions, or stop contributing entirely without penalty.

Question 5

Is an RA better than a Tax-Free Savings Account (TFSA)?

Accepted Answer

They serve different purposes. An RA gives you an immediate tax deduction on contributions but is locked until age 55 and taxed on withdrawal. A TFSA has no upfront tax benefit but grows completely tax-free and can be accessed anytime. For retirement savings, an RA is usually better due to the immediate tax saving. For medium-term goals (5-15 years), a TFSA is often preferable due to flexibility.

Question 6

What is the Two-Pot System and how does it affect my RA?

Accepted Answer

Since September 2024, one-third of new RA contributions go into a 'savings pot' accessible once per tax year (minimum R2,000, taxed at marginal rate). Two-thirds go into a 'retirement pot' locked until age 55. Existing balances were seeded with 10% (max R30,000) into the savings pot. This gives RAs limited emergency liquidity while preserving the retirement savings mandate.

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