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Comparison between tax free savings and retirement annuities

Tax Free SavingsRetirement Savings
Are your contributions tax-deductible?NoYes, up to R350 000 or 27,5% of your annual remuneration, whichever is less.
Are there limits to what you may contribute? Yes. One may only contribute R36 000 per year and up to a total of R500 000 over your lifetime. You are taxed at a rate of 40% on the income resulting from over-contributions. No. If you contribute more than the tax deductible amounts in a particular year of assessment, they can be deducted in the following year of assessment.
Is tax payable on your returns?NoNot while invested in the fund, tax is only payable when you receive money from the fund either as a cash withdrawal or as an annuity payment.
When may you access your investment?Any timeAt retirement after the age of 55 (or due to ill-health) or when you emigrate. You may also access a third of your pension or provident fund savings if your employment is terminated (but then you pay a higher tax rate)
Is tax payable when you access your investment?NoYes. Cash withdrawals are taxed according to the applicable rates which depend on the reason for the withdrawal. Annuity payments are taxed as normal income.
Is the investment protected from your creditors? NoYes
Does the investment form part of your deceased estate? Yes, unless you specify a beneficiary (which is only available with certain TFSAs)No
Are there limitations on what you can invest in? Yes. The investment must comply with the relevant regulations in terms of section 12T(8) of the Income Tax Act. Yes. The investment must comply with Regulation 28 of the Pension Funds Act.