Category Retirement
SUB CATEGORIES General |  Savings & Investments |  Annuties | 

How to get tax back if you belong to your company’s group retirement savings scheme

20 February 2020 Allan Gray

If you work for a company, chances are that you are saving a portion of your salary in a group retirement savings scheme every month, such as an umbrella fund.

What you may not know is that you qualify for special tax breaks, meaning that you could have more money go to your retirement savings pot, and less to the tax man. But you need to take advantage of these tax incentives before the end of February, which is the end of the current tax year.

Less impact on your take-home pay than you would think

Saleem Sonday, Head of Group Savings at Allan Gray, explains that the government has put tax incentives in place as a way to stimulate retirement savings by ensuring your take-home pay does not decrease directly in line with the amount of additional contributions you invest in your retirement savings.

“If you are a member of an umbrella fund, contributions are deducted from your salary before you are taxed. So, if you contribute more to your retirement savings you are taxed on a smaller amount,” explains Sonday.

Every year, as a member of an umbrella fund, you are able to make a pre-tax contribution to your umbrella fund of up to 27.5% of the higher of your taxable income or remuneration, capped at R350 000 per year.

Sonday gives as an example from the table below of a person earning R25 000 per month and contributing 15% or R3 750 to an umbrella fund. This person would take home R18 127 after an amount of R3 123 is deducted for tax. If the same person maximised umbrella fund contributions to 27.5% this would amount to an investment of R6 875 and a salary of R15 814 after R2 310 is deducted for tax. By contributing more and taking a lesser salary, this person’s annual tax bill will be about R9 700 less and his retirement savings would receive a massive boost of an additional R37 500 for the year.

Tax due at different umbrella fund contribution levels


Umbrella fund contribution





Gross monthly salary

R25 000

R25 000

R25 000

Umbrella fund contribution


R3 750

R6 875

Taxable income

R25 000

R21 250

R18 125


R4 112

R3 123

R2 310

Salary available for spending

R20 888

R18 127

R15 815


Source: Allan Gray research

Says Sonday: “If your total contribution to your employer’s umbrella fund for the year is not 27.5% of your remuneration, you can maximise your tax benefit by making an additional voluntary contribution to the umbrella fund before the end of February, if the fund’s rules allow for this.”

When is the best time to make top-up investments to your umbrella fund?

“Not everyone can afford a monthly salary reduction to take advantage of the maximum tax benefits. In this case, it is worth considering making top-up investments into the fund when you have money to spare. Speak to your payroll administrator to make this happen.”

Other options

If your umbrella fund’s rules don’t allow, you could consider opening a retirement annuity fund (RA). This is a retirement savings product that you own in your personal capacity.

“An RA is like a personal pension plan. It is not dependant on employment. You can usually stop and start contributions as you need to and your investment is safeguarded for your retirement,” he notes.

Sonday suggests that investors who plan to make use of this tax concession invest as soon as possible to allow for the investment to process before the 28 February deadline.

“There are no disadvantages with making the most of the tax incentives now, which have been put in place to help you save. When it comes to saving for retirement, now is always the best time to contribute as much as you can afford,” concludes Sonday.

Quick Polls


Can we really afford to ring-fence this cash for retirement when we have real 'life and death' money issues in the present? Should retirement fund assets be more accessible to members?


fanews magazine
FAnews June 2020 Get the latest issue of FAnews

This month's headlines

The crisis is not over
Ethics of lockdown - What value is attached to a human life?
Pandemic redefines the commercial and legal risk landscape
New partnerships needed to create an epidemic and pandemic risk programme
Credible statistics create much needed certainty
SA fixed income: Searching for value in a sea of pandemic risk
Subscribe now