Is it worthing having an RA when you have a Provident fund

I'm currently contributing 12% income to my companies Provident Fund. But before I started contributing (was a contractor before) I took out a Retirement Annuity for about R1000 per month.

Given that I am now contributing to the Provident Fund:
1) Is it still worth having the RA?
2) I know there would be penalities in cancelling?
3) Are the tax benefits still applicable if you have a PF?

More is better. If you can afford it then stick with both, thats what me and my wife is doing.

With regards to the tax issue, I think it is all seen as a whole, but best to ask you tax practitioner.



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RA is tax deductable, 7.5% of your monthly salary.

Provident fund is not.

But remember if you wish to "cash out" your RA before retitement, you'll have to pay alot of tax on it! (on your provident fund not so).

I'd recommend putting at least the 7.5% into your RA, then some into the provident scheme. Maybe get some unit trusts too. Spreading your risk is great advice.

check this website, its from financial brokers, but's it's a good source for comparing:
http://www.pension.co.za/prod5.asp

Man, don't ask for financial advice on this forum. Good advice mixed in with bad and how will you tell the difference?

Provident fund - your contributions are not tax deductible but your employer's contributions are. Many companies structure the package so that the employer makes all the contributions giving you full tax deductibility. (I'm actually not sure if this is still the case or for how long it will be given the rule changes announced as part of the budget speech)

But basically yes your total contributions get grouped into the tax benefit.

Depending on who your RA provider is, there may or may not be penalties for making it "paid-up" where you retain the value but stop contributions. Given changes over the last few years, your chances are better for a fair deal than they were before. Check with your provider.

In general, more retirement savings is better, but you need to consider your entire financial position. What are your short term, medium term and long term needs and aims? What liquidity do you need?

I hate to say it, but it's probably best to find a good financial advisor who charges a set fee (and not commission) and get him/her to set up you up properly.

FrancTheTank said:

RA is tax deductable, 7.5% of your monthly salary.

Provident fund is not.

But remember if you wish to "cash out" your RA before retitement, you'll have to pay alot of tax on it! (on your provident fund not so).

I'd recommend putting at least the 7.5% into your RA, then some into the provident scheme. Maybe get some unit trusts too. Spreading your risk is great advice.

check this website, its from financial brokers, but's it's a good source for comparing:
http://www.pension.co.za/prod5.asp

Click to expand...

I thought it was 15%? Soon to be 20/25%?

xrapidx is right. RA is definitely 15%.

http://www.pension.co.za/prod5.asp

As of 1 March 2012 it is all changing:

Any contributions made by an employer to any retirement fund on their employees' behalf will be regarded as a taxable fringe benefit.

Individual taxpayers will be able to deduct up to 22.5% of their taxable income for contributions made to pension, provident, and/or retirement annuity funds.

In cases where 22.5% of taxable income is calculated at less than R12 000, such taxpayers will be able to deduct contributions up to R12 000.

The maximum deduction allowable in any one tax year will be R200 000.

Click to expand...

http://www.moneywebtax.co.za/moneywebtax/view/moneywebtax/en/page257?oid=56929&sn=Detail&pid=257

provident fund contributions are taxed on your salary - you will not get a deduction your annual assessment.

pension fund contributions are not taxed on your salary - therefore you will get a deduction on your annual assessment.

provident fund - on withdrawal you will get the contributions as a deduction.

pension fund - on withdrawal you will only get the general deduction of R22 500 as a deduction.