In the past 2 to 3 years, there has been considerable changes to retirement funding in the South African market.

An addition to the Estate Duty Act stipulates, that any benefit that is due and payable in respect to membership of any pension or provident, or retirement annuity will be exempt from estate duty on the death of the deceased. This is applicable to the estates of people who died on or after the 1st January 2009.

With an amendment to the Income Tax Act, the Normal Retirement Age defninition has been changed, wtih the age 70 limit having been removed.

Effect 1 March 2008, should you emigrate, a retirement annuity fund may be withdrawn on proof of formal emigration. The amounts withdrawn in excess of the R22 500 will be taxed at the fixed scales applicable to all retirement benefits.

Where an RA has been made paid up and the value is R7000 or less, the member is entitled to claim the full benefit as a lump sum. A member may now access the full fund value as a lump sum on retirement (or death), if the total fund value is less than R75 000.

Some of the advantages:

• As you are no longer required to draw a pension before the age of 70, you can continue contributing to a RA should you require the tax relief.
• A member may now in effect, never retire from a retirement annuity. This allows for estate planning benefits, like not retiring from an RA, as the income for your surviving spouse/beneficiaries can be postponed until after your death (estate duty free).
• On the emigration side, the change has also opened up an avenue for the younger client who has not started contributing to an RA, as they anticipate emigrating later in life.
• Another opportunity is making use of a large single premium contribution to an RA, and reducing your estate for tax purposes.

Most people experience an increase in medical expenses once they retire. After 65, your medical expenses become fully tax deductible. An RA can be used to build up a tax efficient fund for medical expenses after retirement. After retirement the annuity is taxable, however, your medical expenses (including medical aid contributions) are tax deductible.

Investment growth in a retirement annuity is tax free. It does not attract income tax or capital gains tax. If the build up of growth had taken place in the client's estate, they could potentially have been exposed to estate duty of 20%.

On retirement, the client has the flexibility of selecting an income percentage from as low as 2,5%. this is particularly valuable to a client who needs additional  income in retirement...yet still wishes to keep their tax exposure low.

The reason for utilizing a retirement annuity as a retirement funding tool has been significantly increased with changes to retirement funding legislation and taxation.

It is well known that the contributions to a retirement annuity are tax deductible. What is less well known is that certain retirement annuities provide the member with access to a portfolio of shares managed by a stockbroker. Retirement annuity contribution can be compared to a direct investment into a portfolio of shares on the JSE.

Profits made on share trades are exempt from capital gains tax

Using a retirement annuity provides a viable alternative to traditional estate planning instruments. Estate planning is the arrangement, management, securement and disposition of a person's estate.