Why RAs are tax-efficient
Money you put into a retirement annuity is deducted from your taxable income (up to the legal cap). This produces three benefits: an immediate tax refund every month, tax-free growth inside the fund, and (mostly) tax-free withdrawals at retirement.
The 27.5% / R 350 000 cap
Your annual deductible amount is the lesser of 27.5% of your remuneration or taxable income, and R 350 000. ZACalc applies this cap automatically and shows the disallowed portion (if any) separately.
Reading the result
The effective return shown is the saving as a percentage of your contribution — essentially your marginal tax rate. A 41% marginal taxpayer who contributes R 1 000 sees R 410 back as tax saving, so the real cost is only R 590.
Frequently asked questions
Related: PAYE Calculator · Salary Calculator