Introducing
Your new presentation assistant.
Refine, enhance, and tailor your content, source relevant images, and edit visuals quicker than ever before.
Trending searches
PENSION FUND- NO RISK
PENSION FUND- NO RISK
PENSION FUND
A pension fund is one form of saving. Remember we said that saving is any amount set aside for the future.
One of the worst financial mistakes people make is that they do not think about retirement planning. Securing the right retirement plan is one of the most crucial aspects in personal financial planning
and as such it should be practised by every individual as soon as they receive their first pay or salary.
It is a good practice to start saving for a pension in the early days of your life when you are still strong. Most people who do not save for their retirement end up working even in their old age, unfortunately the older one gets, the less employable one becomes.
WHEN EXACTLYN IS THE RIGHT TIME FOR ONE TO START SAVING FOR RETIREMENT AND HOW MUCH SHOULD ONE SAVE?
The answer is quite simple and straightforward. You must start saving in your early 20’s or 30s, immediately when you get your first job probably after leaving school or graduating. Save a portion of your income into an account, advisably a tax-free one.
The earlier you start saving, the more you can save depending on how much you put aside. When you start early you will get into a habit of saving. While it is not easy for young people to have money that they will put aside for 40 years, they can cut on some of their expenses like going out with friends/ entertainment etc. Depending on how much you earn, you can deduct between 1 and 10% from your income.
WHEN EXACLY IS THE RIGHT TIME TO START SAVING FOR RETIREMENT AND HOW MUCH SHOULD ONE SAVE?
WHEN EXACTLY IS THE RIGHT TIME TO START SAVING FOR RETIREMENT AND HOW MUCH SHOULD ONE SAVE?
WHEN EXACTLY IS THE RIGHT TIME TO STA...
At the age of 25, Thabiso was earning R6000 per month. He was able to save 8% of his income which amounted to R480 for 40 years. The total amount of money he was able to save for 40 years is
R2304000.
Illustration
1. R6000 x 8%= R480
2. R480 x 12 months = R5760
3. R5760 x 40 years
=R230400
PENSION FUNDS/ PROVIDENT FUNDS
Pension funds are mainly sponsored by employers. However, employers are not obliged by law to have a pension fund for their employees.
RETIREMENT ANNUITIES
This is a type of pension that individuals who are not on company pension can take up privately. Others who are on a pension can also supplement their pension fund with retirement annuities.
Self-employed individuals can also use retirement annuities.
There is no restriction as to how many retirement annuities you can belong to.
GOVERNMENT PENSION
This is a state pension payable to South African citizens above the age of 60. Old people in state institutions cannot benefit from this type of pension. This pension is meant to benefit those who are earning a minimum wage.
You cannot start saving for a pension in the hope of receiving a pension grant.
TAX BENEFITS ON PENSION FUNDS
The government is trying to encourage people to save for their retirement. This is because people without pension plans become a burden to the government when they retire.
SARS allows a tax deduction of 27.5% of taxable income on retirement annuities and provident funds up to a maximum of R350 000 per year.
This is a tax efficient way of saving as the lump sum amount will reduce the income tax liability in that year.
TAX BENEFITS ON PENSION FUNDS
The lamp sum withdrawn upon retirement is tax free up to R500 000. Below are the tax rates that are applicable to the amounts above R500 000.
Between R500 000.00 and R700 000 tax rate is 18%.
Between R700 000.00 and R1050 000.00 the tax rate is 36%.