Every bank and investment house is telling you to “save for your future” by topping up your Retirement Annuity (RA) before the tax year ends on 28 February.

At TaxTim, we look at it slightly differently.

Yes, an RA is about retirement. But it is also one of the most powerful legal ways to reduce your tax bill right now.

Let’s break it down.

The “discounted investment” effect

When you contribute to a Retirement Annuity, SARS allows you to deduct that contribution from your taxable income.

In plain English: you pay tax on a smaller amount.

Here’s how it works:

• You earn R30,000 per month.
• Normally, you are taxed on the full R30,000.
• You contribute R2,000 to your RA.
• SARS now taxes you as if you only earned R28,000.

If you have already paid PAYE on the full amount during the year, this can result in a tax refund when you file your tax return.

You are effectively investing with help from SARS.

A real example

Let’s use a practical example.

Sam earns R400,000 per year. His marginal tax rate is 31%.

Option A: No RA top-up
He pays roughly R70,000 in tax for the year.

Option B: R50,000 RA top-up before 28 February
He contributes R50,000 to his RA.

SARS now taxes him on R350,000 instead of R400,000.

His new tax bill is roughly R55,000.

The result:
Sam could receive a refund of around R15,000 when he files his tax return.

So while he invested R50,000 for his future, it effectively cost him about R35,000 out of pocket because SARS “covered” R15,000 through the tax saving.

That is the power of the RA deduction.

How much can you deduct?

You can deduct up to:

• 27.5% of your taxable income
• Capped at R350,000 per tax year
• Across all retirement funds combined

This includes pension funds, provident funds and Retirement Annuities.

Why the deadline matters

The South African tax year runs from 1 March to 28 February.

If you want the tax benefit reflected in your 2026 tax return, your contribution must be made before 28 February.

Miss the deadline, and the benefit moves to the next tax year.

What about the Two-Pot system?

From 1 September 2024, the new Two-Pot Retirement System applies to retirement funds.

Under this system:

• A portion of your retirement contributions goes into a “Savings Pot”.
• This Savings Pot can be accessed once per tax year, subject to rules and tax.
• The rest remains preserved for retirement.

This makes retirement savings more flexible than before, while still encouraging long-term investing.

Here’s the important part:

The tax deduction hasn’t changed.

You still get the same RA deduction benefit up to 27.5% of taxable income (capped at R350,000).

So while the structure of retirement funds has evolved, the upfront tax saving remains one of the biggest advantages of contributing before 28 February.

See your numbers before you decide

Every taxpayer’s situation is different.

Before you top up your RA, it helps to understand:

• Your marginal tax rate
• How much of your deduction limit you have already used
• What your potential refund could look like

Use our RA Tax Calculator to see how a contribution could affect your tax return.

And if you want personalised guidance, consider speaking to a qualified financial expert who can help you structure your contribution correctly before 28 February.

The deadline is close, but the opportunity is still there.