How do retirement annuities allow me to create my own retirement savings?

Key takeaways

  • Retirement annuities allow you to save for retirement if you are self-employed or want to top up your employer-sponsored fund.

  • You can only retire from age 55.

  • Withdrawals are not allowed except under certain well-defined circumstances.

If you are self-employed, you have no employer setting up a fund for you and obliging you to contribute to it. But you can create your own personal retirement savings fund using a retirement annuity (RA). 

If you are employed, and you want to top up your retirement savings, you may be able to do so through your employer-based fund if it allows voluntary top-ups.  Alternatively, you can do so with a retirement annuity in your own name.

A retirement annuity is a pension fund set up by financial services companies and governed by independent trustees and representatives of those companies. Membership is offered to individuals by way of a fund policy.

Retirement annuities are good for people who are self-employed and for employed people who are members of employer-sponsored retirement funds but want to top up their retirement savings.   


Key features of an RA

The key things you should know about an RA are that:

Retirement age
  • The earliest retirement age is 55.
Pension must be bought
  • At retirement you must use at least two-thirds of the benefit to buy a pension (annuity) unless your savings in the fund are R247 500 or less. In that case, you can take the full amount in cash.


  • No withdrawals prior to retirement age are allowed except if you:
    • Retire due to ill-health;
    • Emigrate or are non-resident for three years; or
    • You have stopped contributing and the value of your fund is below R15 000.
  • Contributions can be made at a level you choose, although there may be a minimum contribution set by the institution providing the RA.

  • Contributions can be made on an ongoing basis - be recurring - or paid as a single lump sum. Ad hoc contributions may also be allowed.

Contractual terms or not

  • Some RA providers, typically life insurers, get members to contract to contribute monthly for a term or period set in the contract.

  • Changing or altering the terms of the contract by stopping or reducing your contributions, or by transferring your savings to another RA, can result in penalties. 

  • Other RA providers, typically those that offer unit trusts as underlying investments, allow members to start and stop monthly contributions as they please, or to contribute ad hoc.
Funds defined by legislation
  • Retirement annuities are defined in the Pension Funds Act.
Investments must be diversified
Transfers allowed
  • You can transfer your savings to another RA provider through what is known as a section 14 (of the Pension Funds Act) transfer.
Privately owned
  • There is no need for an employer/employee relationship and RAs can move with you from one job to another.
Contributions are tax deductible
Dependants benefit if you die

Group RAs

Some smaller employers are offering membership of a group RA. If your employer has made an arrangement with a provider to contribute to an RA on your behalf, it simply means you will take out the same RA as you would if you signed up as an individual with a financial institution chosen by your employer.

Your employer will pay a monthly amount to that financial services company with a schedule that lists the names of each employee on behalf of whom the employer is contributing so the amount can be credited to the RA in your name.

The benefit of a group RA are:

Your employer is contributing on your behalf.

Your employer may have done some research into what is a good, cost-effective RA.

If you leave your employer, you can continue that RA in your own name without having to transfer your savings.

The disadvantages of a group RA are:

You can’t get group life benefits through the fund. Your employer could, however, provide group life benefits through an untaxed death benefit or unapproved scheme.

If your employer fails to pay your contributions, the trustees of the fund do not have the same obligation in terms of the rules of the fund as the trustees of an employer-sponsored fund to inform you that the employer has defaulted.


If you are leaving employment because you have resigned, been retrenched or dismissed, you should try to preserve your retirement savings from your employer-sponosred fund. You can use an RA, a preservation fund or stay invested in your employer fund. Read more: What happens to my savings in an employer-sponsored fund if I leave my employer?.