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What is a Retirement Annuity [Benefits Guide]

The retirement annuity is a type of investment paid after retirement. This is similar to a pension and it is available to the individual. Through RA, the person can invest and receive this as a lump-sum payment after he/she retires.

Types of Retirement Annuity:

The following are the types of retirement annuities.

Traditional policy-based Retirement Annuity:

In this type, the person has to sign a long-term contract. There are certain rules listed on the form and you need to specify the amount you want to save for retirement. If the person breaks any of the rules, then he has to pay the charges. The commission is 15% more than the retirement annuity. The person registered for RA is not eligible to transfer this to any other service provider. If he does this, he must face the penalty.

New Generation Retirement Annuity:

In this type, you can lower or cancel your contributions at any time. Your amount will remain invested and you will be able to get this paid out after retirement.

History of Retirement Annuity in South Africa (SARAF):

SARAF stands for South Africa Retirement Annuity Fund, which was started in 1961. This fund was first sponsored by an old mutual and is registered with the South African Revenue Services (SARS) and the Financial Sector Conduct Authority (FSCA).

Benefits of a Retirement Annuity:

You become able to save tax.

By registering for RA, you can save on tax. The tax amount is not deducted from the RA contributions.

You can save for retirement.

Through RA, you can save for retirement. You can receive about one-third of the retirement annuity amount as a lump-sum payment and the remaining amount is paid out as monthly income.

Tax benefits of Retirement Annuity:

A retirement annuity was subjected to tax on March 1, 2016. The individual can save around 27.5% of their tax bill through retirement annuity contributions.

Here’s the following table that provides information about the tax rate and withdrawal amount.

At Retirement Tax rate Withdrawal amount Tax Amount
R0- R50,000 0% R0- R25,500 0%
R50,000- R700,000 18% R25,001- R6,60,000 18%
R700,001- R1,05,000 27% R6,60,000- R9,90,000 27%
R1,05,000 36% R9,90,000 36%


What should your age be to receive a retirement annuity:

To receive a retirement annuity payment, the individual must be over 55 years old. He can also get the payment in case of ill health. At first, he received one-third of the RA amount. Then the money is paid out as monthly income.

What is the difference between a pension and a retirement annuity:

The pension is the income paid out by employers to the employees. It is based on a retirement plan. But the retirement annuity is offered by the investing companies.

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