Starting a new job or changing jobs can be exciting but employees need to continue managing their retirement annuities during the process.
A retirement annuity (RA) is a retirement savings plan that people can use to purchase retirement income through a living annuity or a guaranteed life annuity, explains Samukelo Zwane, head of product at FNB Wealth and Investments.
“When changing employers, it’s important to avoid withdrawing your retirement savings”.
He answers the main questions you may have about retirement annuities and how they are utilised:
How does an RA work?
Retirement annuity contributions are tax-deductible. The state refunds you the tax on the contributions up to 27.5%, but not more than R350 000. Returns on retirement annuity investments are not subject to tax on interest, dividends, or capital gains.
How can I benefit from an RA?
Savings in a retirement annuity are not linked to an employer, and when you move from one job to another you can continue to contribute to your RA. Retirement annuity savings are protected from creditors, meaning that, if you become insolvent, creditors can not claim against the living annuity.
What RA options do I have after resigning from a job?
If you were contributing to an employer pension fund, then you can transfer your savings into an existing or new retirement annuity. You should note that preserving your pension or transferring it into a retirement annuity will help you achieve your retirement goals.
What do I need to know if I want to withdraw my RA funds?
- Withdrawals from RAs are not allowed unless the total invested amount is less than R15 000. When withdrawing from your retirement annuity you will need to complete a withdrawal form to access the funds.
- If you are permanently disabled or non-resident for South African tax purposes for three years in a row, then you can access the funds in your retirement annuity.
- Once you turn 55, you can access one-third of your RA savings as a lump sum. You are required to use the rest of your savings to purchase retirement income either through a living annuity or guaranteed life annuity.
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