Question

I retired three years ago, with half my income coming from my company pension fund and the other half from interest from investments. I am paying tax at a rate of 41%. Is there anything that I can do to reduce this amount?

Answer

Islamic marriages are not yet accorded full recognition. A Muslim marriage that has subsequently been solemnised by a marriage officer will be the same as that of a civil marriage in terms of the Marriage Act. This means that it will be in community of property unless the spouses entered into an antenuptial contract excluding the community of property regime. 

All assets that belonged to the spouses when they got married as well as any assets that the two of you acquire during the marriage will accordingly be co-owned by both parties in equal share following their civil marriage. Again, this assumes that you did not enter into an antenuptial contract. Your husband will therefore own half of your house. You are able to bequeath your share of the house to your children. 

Question: I have two retirement annuities as well as R3-million in a company pension fund. I want to stop my retirement annuity contributions when I turn 56 and start drawing a pension from them even though I plan to work until I turn 65. Am I allowed to do this?    

Answer: You are allowed to draw an income from a retirement annuity (RA) from the age of 55, regardless of whether you are working or are not working.   

However, before you take this course, I would strongly recommend that you chat with a knowledgeable financial planner as this plan of action can have long-term implications. You would need to think about a couple of things: 

Your tax rate will be high when you are working, so the additional income from the RAs will be taxed at a higher rate than it would be taxed if you were on pension. 

The longer you invest and the later you start taking any drawdowns, the better off you will be. In your situation, you would be stopping contributions as well as starting drawdowns 10 years earlier than you should.  This will result in a much smaller pension from these RAs. 

The R3-million in your company pension fund will give you an income of about R12,500 a month. Will this be enough to live on? I find that “pensioner inflation” is often a lot higher than official inflation. I often recommend that my retired clients keep their RAs going till their mid-70s as this is when the real impact of the higher pensioner inflation starts to affect your cash flow. 

The additional income from the RAs can be a lifesaver. If you can delay drawing an income from your RA while you are working, it would certainly help your overall financial wellness.