I have already retired and currently draw an income from an existing life annuity. Can I still open a new retirement annuity, and if so, would I qualify for the associated tax benefits?
Thank you for this question. The short answer is yes – there’s nothing in legislation preventing you from opening a new retirement annuity (RA) after retiring from another retirement fund and starting to draw your living or guaranteed annuity income.
“Retirement” applies to membership of a specific retirement fund, not to you as a person, so this door genuinely remains open.
The tax deduction itself is based on income, not employment status.
Currently, the deduction is capped at the lesser of three factors: 27.5% of the higher of remuneration or taxable income that includes capital gains; taxable income that excludes capital gains; or R430 000.
Your existing annuity is taxable income, so you can calculate a deduction limit from it even without a salary. Any other income such as consulting or directorship fees, rental, interest and more, adds to that base and may increase what you can contribute and deduct.
There are some things worth keeping in mind …
If your annuity income falls below the tax threshold, a new RA contribution won’t generate a tax break in the form of a deduction before due tax is calculated.
Any contribution you make above your deductible limit isn’t wasted from a tax-break perspective. The disallowed contributions are carried forward by the South African Revenue Service (Sars) and become deemed contributions in the following tax year.
Disallowed contributions can provide tax relief in a specific order of reduction at the instance of different taxable events.
If such a disallowed contribution is available, the taxpayer can, in the following years, either receive a deduction again upon assessment, or a deduction against retirement fund lump sum taxes or against annuity income in terms of Section 10C.
These last two instances are where the real long-term value lies for someone in your position.
They ensure contributions that were never deducted can still afford you a benefit by reducing the taxable portion of your eventual lump sum or annuity income from this new RA.
So even contributions that don’t yield an immediate tax break still work quietly in your favour down the line.
On access: since you’ve already retired from your existing fund, you’re presumably over 55, the minimum retirement age for any RA. This removes the usual lock-in concern.
When you eventually retire from the new fund, the standard one-third lump sum and two-thirds annuitisation split applies, unless the value falls below the de minimis threshold of R360 000 (from 1 March 2026), in which case the full amount can be taken as a lump sum.
It is necessary to apply these rules to the various components in your retirement fund membership, so your financial advisor can assist you in understanding the detail.
For many retired clients, however, the deduction is secondary to a quieter benefit around estate planning.
Retirement fund investments, including a new RA, fall outside your estate for estate duty and executor’s fee purposes.
Proceeds are dealt with under Section 37C of the Pension Funds Act, not your will, with trustees responsible for allocating the benefit among dependants and nominated beneficiaries.
You give up some direct control compared to a will, but you gain real efficiency: no estate duty (20% up to R30 million, 25% above), no executor’s fees on that portion (up to 3.5% plus value-added tax), and no waiting on the winding-up of the estate before beneficiaries receive the funds.
So yes, you can open a new RA and still benefit in several ways:
- Through the contribution deduction, where your income allows it;
- Through a deduction when retirement fund lump-sum tax is calculated;
- Through Section 10C relief after your eventual retirement from the fund; and
- Through the estate-planning benefits.
I suggest asking your advisor to calculate how meaningfully these benefits apply to your specific circumstances, as their value will depend on your marginal tax rate and broader estate plan.