Pay Less Income Tax in Retirement

Ruvan J Grobler • September 25, 2024

The below is a basic scenario I recently worked on for a client. The individual had around R7mil in the specific Retirement Annuity and needed R55k per month after tax as income from it. One of his concerns was if he should take the 1/3 lump sum allowed or if he should reinvest his entire retirement savings in a post-retirement structure. The below looks at these two scenarios.

 

There are many complexities around structures, disallowed contributions, asset allocation and income percentages that are ignored and simplified in this example.

 

  • Scenario 1:
  • Invest full retirement savings in post-retirement product.
  • First year income: R77 000 (R924 000 annually)
  • After tax: R55 062 (R660 744 annually)
  • Monthly tax payable: R21 938

 

  • Scenario 2:
  • Take R900 000 in cash and reinvest in flexible investment.
  • Lump sum after tax: R825 300
  • Voluntary income from lumpsum : R10 000 (R120 000 annually, no income tax on withdrawal)


Retirement Lump Sum tax table:

  • First year income from 2/3 retirement portion: R60 450 (R725 400 annually)
  • After tax: R45 077 (R540 924)
  • Monthly tax payable: R15 373

 

Income: R45 077 + R10 000 = R55 077 per month

 

Difference in income tax paid in scenario 2 compared to scenario 1: R6 565 per month (R78 780 annually)

 

The real tax saving starts from year two as you also take the lump sum tax into account in year one (R78 780-R74 700). The reinvestment of the lumpsum cash does also provide you with flexibility and extra cash flow if needed. A lower income need will provide a larger income tax saving, which is probably the more important lesson to learn here.

 

A comprehensive retirement plan is extremely important and professional advice is a necessity.

 

Ruvan J Grobler RFP™ (PGDip Fin Planning)

How to invest in a volatile market

By Geo Botha • July 4, 2025
How to invest in a volatile market: 3 Principles to keep in mind ‘In the short term, markets can be very volatile depending on which news story makes headlines. However, over the longer-term investors are always rewarded for staying invested and riding out the waves.’ We know this by now, we have heard it many times before and historical data proves it. Yet it’s easier said than done. When it gets to our own money we are emotionally involved and there is a part of us that believes that this time, it might indeed be different. What if the markets never recover and I suffer permanent capital loss. And with the increase power of AI and social media, it feels like my portfolio hangs on the thread of a single Tweet. In this article Stephen Bernard, an actuarial analyst form our partner Allan Gray share his views, backed by statistics and historical evidence: Read the article here: https://www.allangray.co.za/latest-insights/markets-and-economy/how-to-invest-in-a-volatile-market/

Invest Globally, Prosper Locally: Offshore Strategies for SA Investors

By Ruvan J Grobler • July 1, 2025
In an increasingly interconnected global economy, South African investors are finding compelling reasons to look beyond local borders when building long-term wealth. Offshore investing offers access to broader, more resilient markets, particularly in developed economies with stronger currencies and more stable political environments. Given South Africa’s constrained economic growth, fiscal uncertainty, and the rand’s vulnerability as an emerging market currency, allocating a portion of your portfolio offshore can serve as both a growth engine and a hedge. Investing offshore provides exposure to world-leading companies, industries, and fund managers that are often unavailable in the local market. It allows investors to participate in innovation-led growth in sectors like technology, healthcare, and clean energy, which are typically underrepresented on the JSE. Most importantly, it supports diversification—not just across asset classes, but across geographies, currencies, and economic cycles—reducing concentration risk tied to the South African economy. Key Reasons to Invest Offshore: Diversification: Reduce reliance on South African markets and benefit from a broader global opportunity set. Currency Hedge: Protect your wealth against rand depreciation by investing in hard currencies. Global Access: Gain exposure to top-tier international asset managers and world-class investments. Growth Potential: Participate in faster-growing economies and industries driving global expansion. Important Considerations for South African Tax Residents Before investing offshore, it’s essential to evaluate how your investment aligns with your broader financial planning, particularly around access, succession, taxation, and estate planning: Flexibility: Will you have access to your funds when needed? What types of investments can you hold? Succession Planning: Can your investment be transferred to your heirs? Will Capital Gains Tax (CGT) apply? Tax Compliance: Is the structure tax-efficient, and what must be declared on your tax return? Estate Structuring: Will your investment attract foreign estate duties? Is an offshore executor required? An Efficient Offshore Solution: The Offshore Wrapper A tailored offshore wrapper can simplify many of these complexities, offering a cost-effective and administratively streamlined solution. Key benefits include: No exposure to offshore estate duties No South African executor fees on death No inheritance tax in the offshore jurisdiction Ability to nominate beneficiaries directly for smooth succession Creditor protection for assets held within the structure Consolidation of various investments (e.g., share portfolios, funds) under one structure Minimum investment from $25,000 Tax Treatment The offshore wrapper also provides significant tax efficiency: Taxes are calculated and settled annually by the platform—no action required by the investor CGT is capped at 12%, and income tax at 30% Taxes are applied to USD returns, meaning rand depreciation is not taxed Reach out to me at ruvan@bovest.co.za for more information. Ruvan J Grobler RFP™ (PGDip Financial Planning)