Many assume their retirement plan handles it all, but the deduction deadline could save you big if you act.
South Africans who earn well often assume they have already “handled” retirement planning because they belong to an employer fund, have a retirement annuity (RA), or contribute something each month. Yet every year, many high earners miss the simplest, most powerful tax move available before the tax year closes on 28 February: checking whether they have actually used their full retirement contribution deduction.
The missed opportunity is not subtle. The retirement fund contribution deduction is one of the most valuable tax levers available to individuals in South Africa, but only if you use it deliberately and understand the limits.
The core rule in plain language
For South African tax purposes, contributions to retirement funds can qualify as a deduction, limited to 27.5% of the greater of remuneration (for PAYE) or taxable income, capped at R350 000 per tax year.
That means two things can be true at the same time:
- You can still have deduction room even if you already contribute monthly.
- You can contribute above the cap, but you cannot deduct more than the limit in that tax year.
Importantly, Sars has reiterated that the prescribed limit is currently R350 000.
Why this catches out high earners
High earners often assume the employer fund “takes care of it”. The reality is more complicated. Your deductible amount is based on total qualifying retirement contributions in the year, and in practice this may include more than you expect and sometimes less than you expect.
Common issues:
- You do not know your total contributions for the year because part of it sits in payroll, part in an RA, and part may be a once-off top-up.
- You contribute, but not in the months that matter, and only realise it when filing.
- You assume a contribution is deductible, but the structure or reporting does not match what Sars expects in the return.
- You do not run the numbers against the 27.5% formula and the R350 000 cap.
Sars also made an important amendment effective 1 March 2024. If a person’s year of assessment is less than 12 months, the aggregate deduction allowed under section 11F across the relevant years of assessment in that 12 month March to February period is not allowed to exceed the prescribed limit. This matters for people who cease residency or have unusual assessment periods.
The point most people misunderstand
The R350 000 figure is a deduction limit, not a contribution limit. You may contribute more, but any excess over the deduction limits is treated as disallowed contributions and is carried forward to future years of assessment.
This can still be useful, but you should understand what you are doing and why. The real objective for most high earners is to use the current year’s deduction effectively, rather than leaving value on the table and hoping it sorts itself out later.
A practical February checklist
If you are reading this in January or February, here is a simple sequence that works.
Step 1: Find your true year-to-date contributions
Pull:
- Your latest payslip and IRP5 estimate from payroll if available
- Your retirement fund contribution statement
- Your RA contribution certificate(s), including any ad hoc payments
Step 2: Estimate your deduction ceiling
Use the rule:
- 27.5% of the greater of remuneration or taxable income
- Capped at R350 000 for the year
If your income fluctuates due to bonuses, commissions, or business distributions, do not guess. Model conservative and optimistic outcomes.
Step 3: Calculate your remaining ‘room’
Remaining room equals your ceiling minus qualifying contributions already made. If you have room and cashflow allows, a top-up before 28 February can be one of the most efficient “after-tax” decisions you make for the year.
The entrepreneur and variable-income trap
Businessowners and professionals with irregular income are especially prone to missing this because cashflow comes in waves. You may have a strong year, yet never align contributions to the year-end.
This is where deliberate planning matters. In The Ultimate Guide to Retirement in South Africa (3rd Edition) we highlight a recurring pattern among high performers: they run excellent businesses but treat personal retirement planning as something that will happen later. Later often becomes too late.
A note on behaviour and outcomes
A deduction is not a retirement plan. It is a powerful tax benefit that can accelerate the building of a retirement asset base, but it still needs to be integrated with:
- A realistic retirement income target
- A sustainable drawdown strategy
- Inflation and healthcare cost planning
- Estate and beneficiary alignment
If you are a high earner, ask yourself one honest question before 28 February: “Have I actually used my full allowable retirement contribution deduction, or have I assumed I did?”
At Ascor Independent Wealth Managers, recognised as South Africa’s FPI Professional Practice of the Year, we help clients turn tax rules into long-term financial outcomes with independent, advice-led planning.