# Retirement annuity basics

## What is a Retirement Annuity?

A Retirement Annuity is a long-term investment account designed specifically for retirement savings. Your contributions reduce your taxable income today, and your investments grow tax-free until you retire.

- **Tax-deductible contributions**: Reduce your tax bill by up to 27.5% of your taxable income
- **Tax-free growth**: No capital gains tax or dividends tax while invested
- **Beneficiary protection**: Nominate who receives your savings if something happens to you
- **Custom investment strategy**: Choose how your money is allocated across funds

RAs are suited for anyone who wants to build retirement wealth while minimizing their tax burden. The earlier you start, the more time your investments have to grow.

## Tax benefits explained

Your RA contributions are tax-deductible, meaning they reduce your taxable income for the year. This gives you an immediate tax saving.

**Contribution limits**:

- Deduct up to **27.5% of your taxable income** (including salary, bonuses, and other taxable earnings)
- Maximum deduction of **R350,000 per tax year**

**Example**: If you earn R500,000 per year, you can deduct up to R137,500 (27.5%) in RA contributions. At a 36% marginal tax rate, that's a tax saving of nearly R50,000.

To maximise your tax benefit, Fynbos asks for your tax number and gross salary when you open your RA. This helps you understand how much you can contribute.

**What this means for you**:

- Your contributions effectively cost less because of the tax saving
- You're incentivised to save more for retirement
- The tax benefit is immediate, even though you can't access the funds until retirement

## How your money is invested

When you transfer money to your RA, Fynbos automatically creates buy orders based on your investment strategy. You choose which funds to invest in and what percentage goes to each.

1. Transfer money from your **Cash** account to your RA
2. Fynbos splits the transfer according to your strategy
3. Buy orders are sent to the investment provider for settlement
4. Your holdings appear in your account once settled (2-3 business days)

Your RA account shows three balance components:

| Balance | Description |
| --- | --- |
| **Vested** | Amounts transferred from a previous RA provider |
| **Savings pot** | Money market holdings for stability |
| **Retirement** | Long-term fund investments |

You can adjust your investment strategy anytime. Changes apply to future transfers only — existing holdings remain as they are.

## Withdrawal restrictions

RAs are designed for retirement, which means most of your money is locked in until you reach a certain age or meet specific conditions.

**The two-pot system** (effective from 1 September 2024) provides limited early access: you can withdraw from your savings pot once per tax year. However, the retirement component and vested component remain locked until retirement. See [Understanding the two-pot system](#uf796dPXt) for details.

**When you can access your full RA**:

| Situation | Access |
| --- | --- |
| **Normal retirement** | From age 55 |
| **Early retirement** | From age 55 (same as normal) |
| **Emigration** | After completing SARS tax emigration process |
| **Disability** | If permanently unable to work |

**At retirement**, you can:

- Take up to one-third as a cash lump sum (taxed according to retirement tax tables)
- Use the remaining two-thirds to purchase an annuity for regular income

> **Important**: While the two-pot system allows limited savings pot withdrawals, the majority of your RA remains locked until retirement. Consider your timeline and financial needs before contributing.

## Managing beneficiaries

Your RA lets you nominate beneficiaries — the people who will receive your retirement savings if something happens to you before retirement.

**Adding a beneficiary**:

1. Open your **Retirement Annuity** account
2. Tap the **menu icon** on the Beneficiaries section
3. Select **Add beneficiary**
4. Enter their details: name, ID number, relationship, and contact information
5. Mark whether they are financially dependent on you
6. Tap **Continue**

You can add up to 5 beneficiaries. If you have multiple beneficiaries, you'll allocate a percentage to each (totalling 100%).

**Editing allocations**:

1. Open your **Retirement Annuity** account
2. Tap the **menu icon** on the Beneficiaries section
3. Select **Edit allocations**
4. Adjust the percentage for each beneficiary
5. Tap **Save**

**What this means for you**:

- Your savings bypass the estate and go directly to your nominees
- Update your beneficiaries when life circumstances change (marriage, divorce, children)
- Financial dependents may receive favorable tax treatment

## Setting your investment strategy

Your investment strategy determines how money is split across funds when you transfer to your RA. With decades until retirement, many investors choose growth-oriented allocations.

1. Open your **Retirement Annuity** account
2. Tap the **menu icon** on the Investment strategy card
3. Select **New strategy**
4. Choose from curated portfolios or build your own
5. Set the percentage allocation for each fund
6. Review and confirm

Your strategy is shown on your RA account with a visual breakdown of your allocations. The current investments section shows what you actually hold versus your target strategy.

> **Tip**: Because RAs have a long investment horizon, they're well-suited for equity funds that have higher short-term volatility but stronger long-term growth potential.