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?<\/p>\n
Thank you for this question. The short answer is yes \u2013 there\u2019s 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.<\/p>\n
\u201cRetirement\u201d applies to membership of a specific retirement fund, not to you as a person, so this door genuinely remains open.<\/p>\n
The tax deduction itself is based on income, not employment status.<\/p><\/blockquote>\n
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.<\/p>\n
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.<\/p>\n
There are some things worth keeping in mind \u2026<\/strong><\/p>\n
If your annuity income falls below the tax threshold, a new RA contribution won\u2019t generate a tax break in the form of a deduction before due tax is calculated.<\/p>\n
Any contribution you make above your deductible limit isn\u2019t 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.<\/p>\n
Disallowed contributions can provide tax relief in a specific order of reduction at the instance of different taxable events.<\/p>\n
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.<\/p>\n
These last two instances are where the real long-term value lies for someone in your position.<\/p>\n
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.<\/p>\n
So even contributions that don\u2019t yield an immediate tax break still work quietly in your favour down the line.<\/p><\/blockquote>\n
On access: since you\u2019ve already retired from your existing fund, you\u2019re presumably over 55, the minimum retirement age for any RA. This removes the usual lock-in concern.<\/p>\n
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.<\/p>\n
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.<\/p>\n
For many retired clients, however, the deduction is secondary to a quieter benefit around estate planning.<\/p><\/blockquote>\n
Retirement fund investments, including a new RA, fall outside your estate for estate duty and executor\u2019s fee purposes.<\/p>\n
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.<\/p>\n
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\u2019s 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.<\/p>\n
So yes, you can open a new RA and still benefit in several ways:<\/p>\n
\n
- Through the contribution deduction, where your income allows it;<\/li>\n
- Through a deduction when retirement fund lump-sum tax is calculated;<\/li>\n
- Through Section 10C relief after your eventual retirement from the fund; and<\/li>\n
- Through the estate-planning benefits.<\/li>\n<\/ul>\n
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.<\/p>\n","protected":false},"excerpt":{"rendered":"
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,…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_customify_content_layout":"","_customify_sidebar":"","_customify_page_header_display":"default","_customify_disable_header":"","_customify_disable_header_top":"","_customify_disable_header_main":"","_customify_disable_header_bottom":"","_customify_disable_page_title":"","_customify_disable_content_vertical_padding":"","_customify_disable_footer_top":"","_customify_disable_footer_main":"","_customify_disable_footer_bottom":"","_customify_breadcrumb_display":"","_customify_header_transparent_display":"","footnotes":""},"categories":[4],"tags":[],"class_list":["post-2173","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2173","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=2173"}],"version-history":[{"count":2,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2173\/revisions"}],"predecessor-version":[{"id":2184,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/2173\/revisions\/2184"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=2173"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=2173"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=2173"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}