YOUR MONEY: Are SA RAs still worth it?

Are SA retirement annuities worth it with the tax saving on the first R350k? There comes a point where the low local return very quickly negates tax savings. Should one just pay one’s tax and invest offshore?An RA is a powerful financial product. It is loaded with excellent tax savings and can go a long way towards helping investors save for retirement. But RAs have fallen victim to high costs by some product providers, and poor local markets over the best part of a decade now.

Consider a taxpayer who earns taxable income of R1.5m a year and contributes R350,000 to an RA. Assume the RA’s performance is 4.5% a year . The taxpayer would pay R143,500 less tax, so their RA contribution would effectively be R206,500 . After a year the RA is worth R365,750 . If the portfolio grows at 4.5% a year for five years its value will be R436,000, which is a return of 16% a year on the R206,500 investment.

Nobody van afford to have their savings locked in till age 55 nor locked into SA

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