Coronation Retirement Annuity: Tax Benefits, Access & How It Works

WHAT IS A RETIREMENT ANNUITY (RA)?

A retirement annuity (RA) is a personal retirement savings account that allows South Africans to invest for retirement in a tax-efficient way. An RA invests in unit trusts and offers tax benefits designed to help you grow your nest egg for retirement. If you’re self-employed, an RA can be used as a single solution to house all of your retirement contributions. If you work for an employer, it can be used to supplement your existing employer fund contributions.

WHAT ARE THE KEY BENEFITS OF A RETIREMENT ANNUITY?

An RA offers dual tax benefits that make it a popular way to build up capital that will benefit you in retirement.

1. Tax-deductible contributions (up to certain limits)
   
   RA contributions are tax-deductible up to certain limits. For example, contributions can be deducted from taxable income up to 27.5% or R430,000 annually, whichever is lower. This means contributing to an RA can reduce your taxable income and your tax bill.
   
   
2. Tax-free growth while invested
   
   Investment growth while invested in the RA is tax-free. This allows compounding to work on the full gross return rather than the after-tax remainder.
   
   
   
   
3. Built for long-term saving
   
   Money in an RA is meant for retirement, and access before then is very limited, subject to the two-pot rules and guidelines.

HOW DOES A RETIREMENT ANNUITY WORK?

You can open a Coronation RA online. During the process, you select a suitable fund to power your retirement savings and decide how you want to contribute (lump sums, a regular debit order, or both). Once you start contributing, your money is split into two components, both invested in the same underlying fund/s:

• Two-thirds of each contribution is allocated to your Retirement Income Component (commonly referred to as your retirement pot).
• One-third is allocated to your Retirement Lump Sum Component (commonly referred to as your savings pot).

Regulation 28 limits apply to the underlying investments

The underlying investments must comply with Regulation 28, currently limiting equity exposure to 75% and international exposure to 45% of the value of the investment.

Regulation 28 doesn’t stop you investing offshore in an RA — it simply places limits on how much of the portfolio can be invested in equities and internationally. This means your RA can still have offshore exposure, but within the prescribed caps. Read our Regulation 28 guide for more detail on how these limits work in practice.

WHEN YOU CAN ACCESS YOUR RA

• You can only access most of your savings at the age of 55, or earlier if you are permanently unable to work due to injury/illness.
• You may retire from the fund any time after age 55, or earlier if you are permanently disabled.
• You may make one withdrawal per tax year (minimum R2,000) from the Lump Sum Component, and you cannot access the Retirement Income Component before retirement.

What happens at retirement

At retirement, at least two-thirds of the proceeds must be used to buy a retirement income. The Retirement Income Component must be used to buy a post-retirement income, such as a Coronation Living Annuity or a guaranteed life annuity, from a registered insurer.

WHY CHOOSE CORONATION FOR YOUR RA?

Coronation's Retirement Annuity is a straightforward way to save for retirement through unit trusts with tax benefits.

• Flexible contributions

You can invest from as little as R500 per month, or make a lump sum deposit of R5,000 or more (R10,000 for the initial investment). You can also stop or restart contributions as your circumstances change.

• Transparent fees

Coronation doesn’t charge any initial, account, or administration fees, and your full investment goes into buying units in your chosen fund. Each fund has an annual management fee, and all fees are fully disclosed on each fund’s fact sheet and on Coronation’s website.

• A proven retirement-defining outcome

Coronation Balanced Plus gives retirement savers one simple, all-in-one solution. By combining different types of asset classes in a single portfolio, it’s designed to grow your money steadily over time.

Read more here

SEE WHAT YOUR CORONATION RA COULD HAVE DONE HISTORICALLY

An RA is built for long-term retirement saving: it offers tax benefits, tax-free growth while invested, and access rules that help keep your plan on track. If you want to see how consistent contributions could translate into a retirement outcome, use our calculator to explore historical results using the Coronation Balanced Plus Fund inside a Coronation RA.

Frequently asked questions (FAQ)

• What is a Retirement Annuity (RA)?
  A retirement annuity (RA) is a simple account that lets South African investors save for retirement. It’s a personal retirement savings account designed to help you grow your nest egg for retirement, with specific tax benefits and limited access that helps keep savings focused on retirement.
  
  
• Who is an RA suitable for?
  If you’re self-employed, an RA can be used as a single solution to save for retirement. It can also be used to supplement your existing employer fund contributions. In short, it works both as a primary retirement savings vehicle and as an additional layer alongside other retirement funding.
  
  
• How does a Retirement Annuity work?
  You can open a Coronation RA online. When you contribute, your contribution is split into two components, both invested in the same underlying fund/s: two-thirds is allocated to your Retirement Income Component, and one-third is allocated to your Retirement Lump Sum Component.
  
  
• What is Regulation 28 and how does it affect an RA?
  The underlying investments in an RA must comply with Regulation 28. These limits cap equity exposure at 75% and international exposure at 45% of the value of the investment. In practice, this means your RA’s underlying investments must stay within these regulatory limits.
  
  
• When can I access money in my RA?
  You can only access most of your savings at age 55, or earlier if you are permanently unable to work due to injury/illness. You may retire from the fund any time after age 55, or earlier if you are permanently disabled.
  
  
• Can I withdraw from my RA before retirement?
  Access before retirement is very limited and is subject to the two-pot rules and guidelines. You may make one withdrawal per tax year (minimum R2,000) from the Retirement Lump Sum Component, but you cannot access the Retirement Income Component before retirement.
  
  
• What happens to my RA at retirement?
  At retirement, at least two-thirds of the proceeds must be used to buy an annuity. This can be a living annuity or a guaranteed life annuity from a registered insurer. This is what turns your retirement savings into an income stream.

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