How to make the most of tax concessions and kickstart retirement savings

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Did you catch up on the Budget Speech for 2022? The budget theme for this year sent a strong, unwavering message that Government is attempting to address South Africa’s debt crisis and corruption, speed up structural reform and rein in state owned entities’ misspent budgets.

In a show of empathy for the financial difficulties faced by many South Africans and as a counter measure to rising inflation, no major tax increases were announced. Instead, personal income tax brackets were adjusted by 4.5% in line with inflation to bring relief to individuals and families, while corporate income tax was cut by 1% to 27%. For the first time since 1990, there is no hike in the fuel or Road Accident Fund levy. By contrast, sin and sugar taxes are on the rise. 

But what do the tax changes announced in the Budget mean for South African families? Shakira Bodasing, Legal adviser at Old Mutual, says that there is no denying that South African households are going to feel the pinch in the year to come as the price of everything goes up.

However, Bodasing urges working South Africans to reconsider any rash decisions which could have damaging implications on long-term future retirement savings growth. Instead, she recommends using the latest tax concessions as a reason to strengthen the support and protection of loved ones, which can be done through conscientiously and consistently contributing towards a long-term retirement savings goal that ultimately benefits the whole family.

“By prioritising monthly contributions to your employment pension or provident fund, and/or investing any additional savings in a tax-efficient retirement annuity, you are reducing the risk of becoming dependent on your children or other family members for financial support when your time comes to retire.  As an added benefit, a taxpayer is afforded a combined deduction for contributions to all retirement funds (ie. pension, provident and retirement annuity funds). A maximum of 27,5% of your remuneration or taxable income (whichever is higher) and no more than R350,000, is tax deductible in a tax year.

From a psychological point of view, saving money every month for retirement can also help to ease anxiety and financial stress, as it provides you with a greater sense of control.

When considering retirement savings options, Old Mutual’s Max Investments Optimal Retirement Plan helps smooth the way to retirement, by offering you flexibility, regular investment boosters and no penalties.

With economic uncertainty set to continue for the short-to medium-term, Bodasing says that now, more than ever, families could benefit from the expert guidance provided by an accredited financial adviser, when plotting their financial journey to retirement.

Click here for Old Mutual’s Max Investments Optimal Retirement Plan to learn more about saving for your future – and how to get clued up on tax relief.

Disclaimer

The material is not intended as and does not constitute financial or any other advice. The material does not take into account your personal financial circumstances.

For this reason, it is recommended that you speak to an accredited broker or financial adviser to consider all your options and draw up a plan to achieve your financial goals.