What is a Retirement Annuity?

A retirement annuity (RA) is an investment that helps you save for retirement. Your RA wallet on EasyEquities allows you to invest in managed portfolios (bundles), which are put together by asset managers, or unit trusts created and managed by reputable South African fund managers like Allan Gray, Coronation, Ninety One or M&G. You can access and invest in these products with no minimum investment amount.

Unlike a traditional RA, EasyEquities gives you full transparency and control of your portfolio - you pick the investments you want in your RA and can check in on the performance at any time, adjusting your portfolio as you see fit. 

What is an RA?

An RA account is a tax efficient way of investing for retirement. The contributions made into the RA account are pre-tax contributions, meaning that the contribution is made off your salary before tax is deducted or can be claimed back from SARS if a contribution is made in one’s own capacity outside of their employment (as would be the case with your EasyEquities RA). The investment is free of tax on interest and dividends throughout the lifetime of this investment, but tax is payable upon retirement when the investment is withdrawn (on the growth).

Read more on the tax benefits of an RA here. 

What are the benefits of having an RA on EasyEquities?

The biggest constraint when it comes to RA accounts, are the minimum costs and investment size that comes with the RA investments. Like everything on EasyEquities there is no minimum investment size and no minimum cost. Another benefit is the transparency of the investment as you can view your investment with live values at any time. You can also choose your investments with your discretion within the rules of an RA.

Who is best suited to RAs?

RA’s are tax efficient products and can be beneficial to all investors. The money cannot be accessed before retirement and, so investors who are closer to retirement will have a shorter effective lock-in period until they can received their funds. Investors with a higher current tax rate than what they will have at retirement will also benefit more from an RA.

What if I’m investing in my TFSA as a retirement plan – should I still look at an RA as an addition to my savings? Why?

TFSA are effective ways of investing for retirement. The one difference is that the annual contribution limit is R36 000 for TFSA accounts, so higher contributions can be made into your RA account on an annual basis. An RA has no contribution limits, however only R350 000 or 27.5% of your annual salary (the lower of the two) will qualify for a tax rebate.

The second difference is a lifetime limit, a TFSA account currently has a lifetime limit of R500 000, therefore after approx. 16 years of you contributing annually, you will have to stop making contributions to your TFSA account, whereas there is no lifetime limit to RA contributions. The most notable difference is that your RA contributions are pre-tax contributions and your TFSA account is post-tax contributions, this means that a larger sum of money can be contributed to your RA than your TFSA account.

Read more about TFSAs vs RAs here. 

How to pick your RA investments

You can make use of our EasyWealth platform to view, compare and get more detail on the bundles and unit trusts available to invest in your RA. Visit the EasyWealth website, select either bundles or unit trusts as a category and then use the filtering on the left menu to select RA as your account type. This will bring up all RA available products for you to compare.