Page 28 - Waterfall City Issue 3 March 2025

Waterfall City Finance

THE IMPACT

of retirement planning on family

By Gerhardt Meyer, Senior Legal Specialist: Advice, PSG Wealth

R etirement planning should capital gains tax (CGT) or income

tax is payable within the fund. This
be top of mind for all South
Africans. However, retiring
allows returns to grow tax free over
time.
comfortably is no easy feat
for the vast majority of our country’s • Proceeds from an RA do not form
working population. Interestingly, part of the deceased estate on the
statistics have shown that very few member’s death. Estate duty and
South Africans (as little as six percent) executor’s fees are therefore not
are able to retire comfortably , applicable to these products.
1
and many retirees go without the • The recent introduction of the
essentials that most take for granted. two-pot retirement system allows
members of RAs to access the ‘savings
However, adequate planning can put pot’ component of their retirement
you on track to become a ‘six percenter’. savings before retirement, should they
This is where sound financial advice and need to do so. Members are allowed
planning will always add value, as your one withdrawal from their savings
needs and goals will be analysed, and pot per tax year. This is subject to
appropriate products can be identified a minimum withdrawal amount of
and recommended by a qualified R2,000, but there is no maximum. At
financial adviser. Before giving any retirement, the lump sum taken will
advice, a financial adviser will make sure be taxed according to the retirement
they understand your goals and needs, lump sum table.
what is important to you and your
family, and what recommendations you Gerhardt Meyer, Senior Legal Specialist: Advice, Beneficiary nomination and
are comfortable with. PSG Wealth its implications
Retirement annuity funds are governed
One product that may be very useful deductible up to 27.5% of by the Pension Funds Act and the
as part of your retirement planning remuneration or taxable income, up distribution of death benefits held in
is a retirement annuity (RA). RAs are to a maximum of R350,000 per year. these vehicles is conducted in terms of
powerful investment vehicles, which • Excess contributions above the this Act. The aim of this legislation is to
most have heard of, but many may not maximum threshold may roll over for ensure that the financial dependants
be fully aware of their benefits within a future deductions in subsequent tax of a retirement annuity fund member
well-structured financial plan. years, so you don’t ‘lose’ the benefit. In receive these proceeds if the member
fact, under some circumstances, the passes away. Trustees of retirement
Let’s recap some of the tax benefit may even roll over into your funds are required to investigate
benefits of RAs pension payments after retirement. who was financially dependent on a
• Contributions to RAs are tax • No tax is paid within an RA, i.e. no member at the time of his/her death.

26 Waterfall City Issue 3 2025