An annuity is a financial arrangement that converts a capital amount into a regular income stream. In a retirement context it is how accumulated retirement savings are turned into a pension paid out over the retiree's life.
What it means
The word is the A in retirement annuity. A retirement annuity fund is a vehicle an individual contributes to for retirement, separate from any employer fund; at retirement the proceeds are typically used to buy an annuity that pays a regular income. Contributions during working life carry the same Section 11F deduction as other retirement funds.
Where it fits in
Where a retirement annuity contribution is run through payroll, it is treated like other retirement contributions: the employee's share reduces the PAYE base within the Section 11F cap. The annuity itself - the income stream - sits at the retirement end, outside the payroll cycle.
Key rules
- A contract turning capital into a regular income stream.
- The income vehicle a retirement annuity fund ultimately pays out through.
- Retirement annuity contributions get the Section 11F deduction like other funds.
- The payout annuity is a retirement-phase concept, not part of the active payroll run.
