So what about tax?

Firstly, all the retirement funds mentioned above (regardless of whether they are pre- or post retirement) have a zero tax liability within the fund regarding investment growth and interest. This means that all the net rental property and interest will be free of any income tax and also no capital gains tax will be collected on the gains within the portfolio. This is a massive benefit for those desperately trying to secure their retirement provision.

With this as an overarching principle, let?s explore other tax considerations according to the various stages:

Pre-retirement

SARS allows for some attractive tax deductions when it comes to providing for retirement funding:

• Retirement Annuities. The general guidelines state that retirement annuity contributions are deductible of the greater of:

  • 15 percent of non-retirement funding taxable income; or

  • R3500 minus any allowable pension fund contributions; or

  • R1750

  In addition to this, any contributions not claimed in the previous year may be included to the deduction to a maximum of R1800.These figures are deemed as an annual amount.

• Pension fund contributions, are split into employer and employee contributions. Deductible contributions are limited to:

  • Employer: 10 percent (incl. Medical aid)

  • Employee: 7.5 percent of pensionable remuneration or R1750 (whichever the greater). In practice this could be extended to 20 percent as a total.

• Provident fund contributions, are dealt with by means of a salary sacrifice and therefore do not form part of gross income for purposes of income tax. For this reason, there is no 'tax deduction' per se purely because one?s salary has been 'reduced' in the eye?s of the taxman ? different means, same result. Again, it's limited to a practical maximum of 20 percent of approved remuneration.