Proof that it pays to top up your retirement annuity

By Janice Roberts

Investing for retirement through a retirement annuity (RA) is probably the most effective and rewarding way to save for retirement because of the unique benefits offered.

“The most significant benefit is the fact that you can enjoy unparalleled tax savings which you can use to boost your retirement savings,” explains Tandisizwe Mahlutshana, Marketing Executive at PPS Investments.

To get these great savings you can top-up your RA to the limits set by SARS before the end of each tax year. The current tax year ends on 28 February 2019.

You can contribute up to 27.5% of your annual taxable income in a RA, subject to a maximum tax deduction limit of R350 000 per annum.

Furthermore, SARS will not penalise you for contributions that exceed the allowable limits. Instead, you will be allowed to add the excess onto the following year’s tax returns.

The proof is in the pudding

As an example, twins, Thabo and Thando earn annual salaries of R500 000. Both contribute 7.5% of taxable income into their respective retirement annuities. They earn an annual bonus of R100 000 each. Thabo goes on a spending spree. Instead of splurging her entire bonus, Thando takes a portion of her bonus to top-up her RA. After 15 years, Thando has 80% more in retirement savings than Thabo.


(does not top up RA)

30% Thando

(Takes 30% of annual bonus to top-up her RA.)



RA top up from the annual bonus  

R30 000

R36 207 Tax on bonus


R25 200
R37 500 Total RA contributions per annum R67 500
R750 884.54 Total RA savings over 15 years


R1 351 592


Thando saved 80% more than Thabo after 15 years.
The investments grow at an average of CPI+4% while the earnings are adjusted for inflation.


“Making a decision not to top-up your retirement annuity in favour of having more disposable income can be tempting but in the long run the benefits of topping up your retirement annuity far outweigh the decision not to,” says Mahlutshana.

To get an idea of the maximum top up contribution allowed on your retirement annuity and the tax you could get back, use the PPS Retirement Savings Tax Calculator on our website:

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