RA contributions deadline 29 February 2012

Investors have less than two weeks left to invest in a retirement annuity (RA) or top up an existing RA in order for their contributions to be recognised for the 2012 tax year. RA contributions must reflect in the institution's bank account on or before 29 February 2012 in order to qualify for the 2012 tax year. Completed addition or application forms also need to reach us before this date.

RAs remain a great way to save for retirement and offer the following benefits:

Tax efficiency:

• Contributions are tax deductible within certain limits.
• There is no income or capital gains tax applicable during the term of the investment.
• Dividends tax of 10%, effective 1 April 2012, does not apply to RAs.
• Unclaimed contributions can be deducted on retirement.
• At retirement, the remaining value (minimum two-thirds) can be transferred to an annuity on a tax-neutral basis.

Attractive estate planning tool:

• Individuals can contribute to an RA at any age and can choose to let their RA mature any time from age 55.
• As RAs no longer have a maximum age limit investors need not "retire" from an RA, making it effective as an estate planning tool.
• On the death of an RA investor, lump sums received by beneficiaries are exempt from estate duty.
• Beneficiaries can also take advantage of tax free amounts in the event that a member had not done so during their lifetime.
• Annuity benefits are also free from estate duty.

New RAs and additions need to be Regulation 28 compliant

Please note that new Retirement Annuities or changes to existing Retirement Annuities must comply with Regulation 28 of the Pension Funds Act. These investment requirements limit the exposure investors can have to certain asset classes (i.e. 75% in equities and 25% in international assets).

Extreme caution needs to be taken if clients wish to top up an existing RA as they need to ensure that their unit trust selection complies with these limits. Alternatively, if your existing retirement annuity is fully exposed to equity funds it could be advisable to keep it intact and start a new Retirement Annuity which complies with Regulation 28.

Silke Financial Services has the skill and expertise to guide to in this regard.