The first documented case of retirement planning in any form was during the rule of Caesar Augustus (27 BC – 14 AD). Augustus’ public revenue reforms had a great impact on the subsequent success of the Roman Empire and this included, among others, providing retirement funds for the military. In order to fund the cunningly crafted retirement plan, a new tax was instituted – and so was born Inheritance Tax.

It would seem that Marcus Brutus killed the wrong Caesar.

Prior to the 18th century, the average life expectancy of people was between 26 and 40 years. The average person was pushing daisies long before there was any need for retirement planning.

Retirement as a government policy only began to be adopted during the late 19th century.

In 1883, the German chancellor, Otto Von Bismarck announced that anyone over 65 years old would be forced to retire and that the government would pay a pension to them. This was mainly done in an effort to curb the rising popularity of Marxism.

Long live socialism and populism!

Section 11(k) of the Income Tax Act deals with the taxpayer’s contributions to a Retirement Annuity (RA) fund. Broadly and in simple terms there are three tax benefits:

  1. Contributions are tax deductible. Taxpayers are allowed to deduct 27,5% of gross remuneration or taxable income (whichever is the higher) limited to a maximum of R350 000 per annum.
  2. Investment returns earned by the RA is tax free. Tax on RA proceeds are deferred until retirement meaning that you can earn compounded interest on the tax portion invested.
  3. Once benefits are paid out the lump sum benefits are taxed on a sliding scale with a portion of the benefit tax free.

Words often fail me when clients refuse to understand the workings of an RA. It is an extraordinary tax break which only fools would not utilise.

Basically the government contributes towards the taxpayer’s retirement via reduced taxes. This means that your RA can have investment growth of 0% but you will still have a return on your investment thanks to the tax saving.

The table below illustrates tax savings and ROI for 3 different monthly incomes:



Furthermore, as an added bonus your RA investment is safe from creditors.

According to the Mental Health Foundation, one in five of present day retirees experience depression with retirement. Retirement also increases your chances of getting some or other debilitating disease by 60%. Spouses are suddenly forced to spend a lot more time together and that, in my opinion, is more than enough reason to be clinically depressed.

Retirement alone seems horrible enough let alone retirement without the necessary retirement savings in place.

Article by C2M Director, Carel Steenkamp CA (SA) RA. For more information email