One of the most common misconceptions among South African retirees is that once you have retired, the opportunity to contribute to a retirement annuity (RA) and enjoy the associated tax benefits come to an end. This is certainly not the case.
For retirees looking to optimise their financial and tax planning, understanding how retirement annuities work after retirement could unlock additional opportunities to preserve and grow wealth.
Retirement Does Not Mean the End of Retirement Saving
A key point often overlooked is that “retirement” applies to a specific retirement fund and not to an individual. In practical terms, a person who has retired from one retirement fund and is receiving income from a living annuity or guaranteed annuity may still be able to open a new retirement annuity.
This creates an interesting planning opportunity for retirees who continue to earn taxable income through various sources, including:
- Living or guaranteed annuity income
- Capital Gains on the disposal of investment assets
- Rental income
- Consulting or advisory work
- Directorship fees
- Interest-bearing investments
- Other taxable income streams
The ability to contribute to a new RA means retirees may still be able to incorporate tax-efficient retirement saving into their broader wealth management strategy.
Understanding the Tax Benefits
One of the most attractive features of retirement annuities remains the tax deduction available on qualifying contributions.
Current legislation generally allows individuals to deduct retirement fund contributions up to the lesser of:
- 27.5% of remuneration or taxable income (including capital gains);
- Taxable income excluding capital gains; or
- R430,000 per annum.
Importantly, the deduction is based on taxable income rather than employment status. This means that retirees receiving taxable annuity income may still qualify for tax benefits even if they no longer earn a traditional salary.
Excess Contributions Are Not Lost
Another important consideration is that contributions exceeding the annual deductible limit are not necessarily wasted.
Any disallowed contributions are carried forward by SARS and provide future tax relief in subsequent tax years. These accumulated contributions are applied against future capital gains and in-fact, all sources of taxable income.
For long-term investors, this feature can create meaningful value over time and should form part of a comprehensive retirement income strategy.
Estate and Retirement Planning Considerations
Opening a new RA after retirement should not be viewed purely as a tax-saving exercise. It may also provide additional benefits within a broader financial plan, including:
- Continued tax-efficient investment growth.
- Additional retirement income planning flexibility.
- Structured wealth preservation for later retirement years.
- Alignment with long-term estate planning objectives.
Our Perspective
Many retirees assume their retirement planning journey ends once they start drawing an income. In reality, retirement is often a multi-decade phase of life that requires ongoing financial management, tax planning and investment strategy.
For retirees with sufficient taxable income and discretionary investments which are accruing Capital Gains, a retirement annuity contribution can provide valuable tax and investment benefits
As always, careful planning and personalised professional advice remain essential to ensuring retirement capital is structured as efficiently as possible.
Source
Adapted from:“Can I Open a New Retirement Annuity After Retiring and Still Receive Tax Benefits? (Part II)” by Elke Brink, PSG Wealth, published by Moneyweb on 25 August 2026. [moneyweb.co.za]
