Did you know that you can get significant tax advantages from investing in a retirement savings vehicle while growing your long term savings?

The contributions you make to your company’s pension or provident fund or a retirement annuity fund are tax deductible, which lowers your taxable income.

These funds are also exempt from dividends tax and capital gains tax.

You can claim a tax deduction on contributions to all the pension, provident and retirement annuity funds that you belong to, up to 27.5% (in the aggregate) of the higher of your remuneration or your taxable income (up to R350 000 every year).

Your taxable income is not only your salary income. You can also include rental income, dividends from real estate investment trusts (Reits), gains from realised assets and interest earned on investments in your taxable income.

The tax deduction on your contribution to your employer’s pension or provident fund means that you can invest with before-tax money and reduce the amount of tax that you pay.

If you are contributing less than the amount that is tax deductible to all the pension, provident and retirement annuity funds that you belong to, you can consider increasing your contribution to reduce your tax liability.