Retirement annuity tax deduction explained
Money you put into a retirement annuity is deducted from your taxable income, so SARS effectively pays part of your contribution.
The deduction limit
Contributions to retirement annuities, pension funds and provident funds are deductible up to 27.5% of the greater of your remuneration or taxable income. From 1 March 2026 the deduction is also capped at R 430 000 a year, up from R 350 000. The limit covers all your funds together, including contributions your employer makes on your behalf, which are first added to your income as a fringe benefit.
How much tax it saves
The deduction comes off the top of your income, so it saves tax at your marginal rate.
| Taxable income (2026/27) | Marginal rate | Tax saved per R 1 000 contributed |
|---|---|---|
| Up to R 245 100 | 18% | R 180 |
| R 245 101 – R 383 100 | 26% | R 260 |
| R 383 101 – R 530 200 | 31% | R 310 |
| R 530 201 – R 695 800 | 36% | R 360 |
| R 695 801 – R 887 000 | 39% | R 390 |
| R 887 001 – R 1 878 600 | 41% | R 410 |
| Above R 1 878 600 | 45% | R 450 |
For example, on a taxable income of R 500 000, contributing R 3 000 a month (R 36 000 a year) saves R 11 160 in tax, so the contribution really costs R 24 840. Below the tax threshold an RA saves no tax, although it can still be a good way to save.
Getting the saving
If your employer pays your RA through payroll, your PAYE is reduced each month. If you pay it yourself, your RA provider sends you an IT3(f) tax certificate after the tax year ends; enter it on your return and the saving comes back as part of your refund. You can also ask your employer to take a private RA into account for PAYE.
Contributions above the limit
Anything above the limit is not wasted. It is carried forward and deducted in later years, and whatever is still unused at retirement makes part of your lump sum or pension tax-free.
The trade-off
The tax saving comes with restrictions. Under the two-pot system, one third of new contributions goes into a savings component you can draw on once a year, taxed at your marginal rate, while two thirds stays locked until you retire, from age 55. At retirement, the retirement component must buy a pension, and at least two thirds of the vested component must too. RAs must also follow Regulation 28, which limits how much can be invested offshore and in shares.
Frequently asked questions
Is it worth contributing to a retirement annuity?
For most taxpayers the immediate tax saving of 18% to 45% is hard to beat, as long as you are comfortable with most of the money staying invested until retirement.
What is an IT3(f) certificate?
The tax certificate your retirement annuity provider issues showing what you contributed during the tax year. You use it to claim the deduction on your tax return.
Can I contribute a lump sum instead of monthly?
Yes. Lump sums and monthly debit orders are both deductible, within the same annual limit.
Related calculators
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Open calculator →Deduction limit (27.5%, capped at R 430 000 from 1 March 2026) per Budget 2026; tax brackets from SARS: rates of tax for individuals. Checked 13 October 2026. This guide is general educational information, not tax or financial advice.