WEALTH MANAGEMENT
FREQUENTLY ASKED QUESTIONS
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QUESTIONS & ANSWERS
WANT TO RECEIVE MORE TAX BACK FROM THE TAXMAN AND LOOK AFTER YOUR RETIREMENT AT THE SAME TIME?
Were you aware that the Government this year made a fundamental change in the taxation on Retirement funding, and YOU, as the taxpayer, can now get a significant amount more back from the taxman, than previously?
If you didn’t know this, and want to get more tax back, then a retirement Annuity may be the answer for you!
WHAT IS AN RA, HOW DOES IT WORK, AND HOW DO I GET MONEY BACK?
Before, we go further; let me remind you what a retirement Annuity is. A retirement annuity (RA) is essentially a private pension plan - an investment that is specifically designed to help you save for retirement.
When you turn 55 (or an age thereafter, if you prefer) it pays out a lump sum (of which a good portion is tax free and the rest is taxed at a very favourable rate)
In essence, government “pays” you a considerable amount of money to incentivise you to save for your own retirement
HOW EXACTLY DO THEY “PAY” YOU?
Firstly, you can now deduct contributions (up to 27.5 percent of your gross income, was previously 15%) to your RA from your taxable earnings. (Up to a maximum deduction of R350, 000 per year)
For example:
Joe earned R240 000 per year and contributed R36 000 (15 percent of R240 000) to his RA last year. He would’ve got taxed as if he had earned R204 000 per year.
Joe would have had to pay R35053 in tax (2015 tax tables) if he didn’t pay into an RA. However, because he contributed to an RA, he would have only been liable to pay R26053 and would’ve received a nice, fat rebate of R9000. In essence, the government would’ve paid him R9000 to invest R36 000 towards her own retirement!
Now, with the new legislation changes as of 1 March 2016, If Joe earned R240 000 and he made no contributions this year, he would pay R35053 in tax. If Joe uses the full allowance and contributes 27.5% (R66 000), he would now pay tax of only R17818 (a massive saving in tax of R16039 for the year!
In addition, with any other investment’s you have to pay capital gains tax; not so with your RA.
HAVE YOU EVER THOUGHT ABOUT WHAT YOU WOULD DO IF YOU COULDN’T WORK BECAUSE OF AN ILLNESS OR YOU WERE IN AN ACCIDENT?
Would you be able to pay all your bills and feed your family?
Income protection is VITAL to remove these possibilities, as It pays out a percentage of your salary in regular monthly payouts until you can go back to work.
Key Points:
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Can offer monthly payments if you're unable to work
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Can cover accident and sickness and/or unemployment
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Consider the pros and cons of income protection alongside building up your own savings pot, critical illness cover and/or life insurance
WHY SHOULD YOU TAKE OUT INCOME PROTECTION?
Income protection is a useful product for anyone who wants to cover their salary so they don't fall behind with monthly expenses should they be unable to work.
Examples of when people consider income protection insurance:
Buying a house
A house is likely to be the most expensive purchase you make, and taking out income protection could help you to keep on top of your mortgage payments if you're unable to work.
Birth of a child
Having an extra dependant relying on your salary could make you consider protecting your income.
Self-employed people
Self-employed people have no benefits other than those provided by the state, and being unable to work means being unable to earn.
Switching jobs
If you no longer receive the same kind of benefits that you did in your previous job in terms of things such as sick pay, you may want to protect your salary. Alternatively, if you get a better job or receive promotion, you may want to protect your increased earnings.
Typical exclusions:
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Pre-existing medical conditions you were aware of before taking out a policy
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Disabilities or illnesses as a result of a criminal act
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Self-inflicted injuries
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Pregnancy
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Alcohol or drug abuse
