A Retirement Annuity Fund is a series of monthly income paid out to retired employees by insurance companies such as Old Mutual, Sanlam, Momentum & liberty life excetra.

Usually, these monthly payments are for life and are normally bought by a cash lump sum received from a pension fund pay out upon retirement.

Since the acquistion of a Retirement Annuity Fund is normally done through a cash lump sum purchase upfront, there is no tax implications in terms of deductions on acquisition.

Cash lump sum payments from pension funds are subject to tax according to the cash lump sum tax calculator.

Monthly annuity income is subject to income tax at the normal tax rate, however.

• Interest income on the annuity is tax free.
• Dividends earned from the annuity are tax free.
• Capital gains on retirement annuity investment funds are also tax free.