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Retirement

Retirement planning in South Africa

A pension fund, a provident fund, a retirement annuity and a preservation fund are all retirement money. They are not an emergency fund, and a two-pot withdrawal is not a salary.

Reviewed 29 October 2026 by the WiT Money editorial team. This is general information, not a recommendation from a named adviser.

Key points

  • The deduction illustration uses 27.5% and a cap of R430 000 for the 2027 year of assessment.
  • Leaving a job does not make the whole fund cash. A preservation fund exists so the benefit can stay invested.
  • The savings, retirement and vested components of the two-pot system are not interchangeable.

An employer pension or provident fund is part of the job. A retirement annuity is a fund you contribute to yourself. A preservation fund holds a benefit you moved when you left an employer. All of them are meant to be there at retirement. Fees compound for decades. Ask for the effective annual cost before you treat two funds as equal.

For the 2027 year of assessment the tax file allows a deduction of up to 27.5% of the remuneration you enter, capped at R430 000 a year, and never more than the contribution. Those figures were checked on 28 October 2026. A self-employed person uses the same deduction rules on taxable income, not a special product. The calculator uses the remuneration figure you type.

Pension, provident and retirement annuity

The historic difference was how much could be taken in cash at retirement. Annuitisation rules have been aligned over time, with older vested rights treated separately. Do not assume a provident fund still pays the entire benefit in cash. Ask the fund what is vested and what must buy an income.

Changing jobs

You can often leave the money in the old fund, move it to the new employer's fund, or move it to a preservation fund or a retirement annuity. Cashing it in is the option that triggers tax and leaves a smaller retirement. The vested component, if you have one, follows the rules that applied to that money. It is not a second savings pot.

How much is enough

Nobody on this site can name your number. A rough sketch is the income you want, minus what you expect from other sources, for the years you might live. The retirement calculator projects a pot from a contribution and a return you type. Run a lower return as well. If the plan only works on the high number, it is not a plan.

Questions readers ask

Should a self-employed person use a retirement annuity?

It is the product built for personal contributions, with a deduction if you pay tax and with locked-up access. A tax-free investment is more flexible and has a contribution cap. They do different jobs.

Related

Sources

Page updated 29 October 2026. A source date is the day WiT Money checked that page, not a promise the institution has not changed it since.