A retirement annuity (RA) contribution is an amount an employee pays into a personal retirement annuity fund, separate from any employer-sponsored pension or provident fund, that reduces the employee's taxable income for PAYE purposes.
What it means
Government encourages personal retirement saving by allowing contributions to registered retirement funds - pension, provident and retirement annuity funds combined - to be deducted from gross remuneration before PAYE is calculated, up to a capped percentage of income.
Where it fits in
Where an employer facilitates the deduction through payroll, the contribution reduces the employee's taxable income for that period before the PAYE tables are applied. Contributions made independently of payroll are instead claimed by the employee directly on their personal tax return.
Key rules
- Deductible up to 27.5% of the greater of taxable income or remuneration, capped at an annual rand amount SARS sets.
- Reduces taxable income before PAYE is calculated, when deducted through payroll.
- Tracked alongside pension and provident fund contributions, since the cap applies to all three combined.
- Lump sum withdrawals from a retirement annuity at retirement are taxed separately under a tax directive, not through ordinary PAYE.
