Can you start a retirement annuity after you've already retired?
Yes, you can. There's no upper age limit for opening a retirement annuity in South Africa, and SARS doesn't prevent you from contributing to one after you've already retired from a pension or provident fund.
We often hear this question from clients who've taken early retirement or who want to keep investing tax-efficiently even after they've left formal employment. The short answer is that retirement annuity tax benefits remain available to you, provided you're still earning taxable income.
But—and this is important—the way your new retirement annuity is structured can affect what happens when you eventually retire from that annuity. Let's unpack how it works.
How retirement annuity tax benefits work in South Africa
Retirement annuities offer one of the most valuable tax breaks available to South Africans. When you contribute to a retirement annuity, SARS allows you to deduct those contributions from your taxable income, subject to limits.
The current annual limit is 27.5% of your taxable income or remuneration, capped at R350,000 per year. Any amount you contribute beyond that cap won't qualify for a tax deduction in that year, though it can be carried forward to future years.
This applies whether you're employed, self-employed, or drawing a pension. As long as you have taxable income, you can contribute and claim the deduction.
What counts as taxable income for this purpose?
SARS defines taxable income broadly. It includes salaries, business income, rental income, and yes—pension income. So if you're receiving a regular pension or annuity payment and you're paying tax on it, you can contribute to a new retirement annuity and claim the deduction.
If you have no taxable income at all—say, you're living entirely off tax-free savings or gifts—then a retirement annuity won't give you any immediate tax benefit. But it can still be a useful estate-planning tool.
Why the structure of your new retirement annuity matters
Here's where it gets more technical, but it's worth understanding if you're serious about maximising flexibility and minimising tax down the line.
When you retire from a retirement annuity, you're allowed to take up to one-third of the fund value as a lump sum (subject to tax), and the remaining two-thirds must be used to purchase a life annuity—unless your total retirement fund value across all your retirement products is below the de minimis threshold, currently R247,500.
If your total retirement benefit falls below that threshold, you can take the entire amount as a lump sum instead of being forced to buy an annuity.
Opening a standalone retirement annuity vs. adding to an existing one
If you open a brand-new, standalone retirement annuity after you've already retired from your employer's fund, that new annuity is treated separately for de minimis purposes when you eventually retire from it.
This means if the balance in your new retirement annuity is under R247,500 at retirement, you can take the full amount as cash—even if you've already retired from other funds with larger balances.
On the other hand, if you add contributions to an existing retirement annuity that was already in place before you retired, the de minimis test may apply differently, especially if that original fund was linked to previous retirement events.
We're not financial advisers, so we can't tell you which structure is best for your situation. But this is definitely something worth discussing with a qualified financial planner before you commit.
Can you access the money before retirement?
No. Retirement annuities are locked in until you turn 55, or until you formally retire (whichever comes later). You cannot withdraw early, even in emergencies, except in very limited circumstances like emigration or severe financial hardship—and even then, SARS applies strict conditions.
This makes retirement annuities different from other investments like unit trusts or tax-free savings accounts, where you have more flexibility to access your capital. The trade-off is the generous tax benefit.
What about your estate and beneficiaries?
One advantage of retirement annuities is that they don't form part of your estate for executor's fees or estate duty purposes, though they may still be subject to estate duty depending on your overall financial position.
You can nominate beneficiaries, and the fund trustees will decide how to distribute the benefit. This can make retirement annuities a useful tool if you want to provide for dependants or ensure a portion of your wealth passes outside your will.
Is it worth opening a new retirement annuity if you're already drawing a pension?
It depends on your personal tax position and goals.
If you're in a high tax bracket and you have surplus income each month, contributing to a retirement annuity can reduce your tax bill now while building additional retirement capital. The 27.5% deduction can translate into significant savings, especially if you're earning above R500,000 a year.
If you're earning a modest pension and paying little to no tax, the benefit shrinks. You'd still be locking money away until 55 (or later), but without the immediate tax relief.
In our experience, retirees who continue earning consulting income, rental income, or director's fees often find retirement annuities an efficient way to shelter that income from tax—while continuing to build long-term wealth.
How does this interact with two-pot retirement rules?
The two-pot retirement system, which came into effect in September 2024, introduced a savings component that allows limited access to a portion of your retirement fund before retirement. However, retirement annuities opened after retirement still follow the same fundamental rules: they remain locked in, but they do participate in the two-pot framework if opened after 1 September 2024.
This means a portion of future contributions will go into a savings pot (which you can access once per tax year under certain conditions), and the rest into a retirement pot (locked until retirement). The tax deduction still applies to the full contribution amount.
What about credit, loans, and short-term cash needs?
Because retirement annuities are locked in, they're not suitable if you might need the money for unexpected expenses, debt repayment, or emergencies. If you're considering a retirement annuity but you also have outstanding credit or personal loans, it's worth thinking carefully about your repayment discipline and cash flow before committing funds you can't access.
For short-term financial needs—whether that's covering a medical bill, consolidating debt, or handling an urgent home repair—other financial products may be more appropriate. At Spring Loans, we help South Africans navigate personal credit responsibly, with a focus on affordability and transparent terms. But we'd always recommend ensuring your retirement planning is on track before taking on new credit commitments.
Steps to take before opening a new retirement annuity
If you're seriously considering this, here's what we suggest:
- Check your current tax position. Calculate how much taxable income you're earning and whether you're likely to benefit from the deduction.
- Understand your existing retirement funds. Know what you've already retired from, and what funds are still active. This affects the de minimis calculation later.
- Speak to a registered financial adviser. They can model different scenarios and help you decide whether a standalone retirement annuity, a living annuity top-up, or another structure makes more sense.
- Review your estate plan. Make sure your beneficiary nominations are up to date and aligned with your will.
- Consider your liquidity needs. Don't lock away money you might need in the next few years.
Frequently asked questions
Can I contribute to a retirement annuity if I'm over 65?
Yes. There's no age limit for contributing to a retirement annuity in South Africa. As long as you have taxable income, you can claim the deduction.
Will I pay tax on the lump sum when I retire from my new retirement annuity?
Possibly. Retirement fund lump sums are taxed on a sliding scale by SARS. The first R500,000 you withdraw over your lifetime is tax-free, but amounts above that are taxed at increasing rates. If you've already used up your R500,000 allowance from previous retirement events, the new lump sum will be fully taxable.
Can I transfer my retirement annuity to another provider?
Yes, you can transfer between retirement annuity providers without triggering a tax event, as long as it's a direct transfer and you don't take any cash out.
What happens to my retirement annuity if I emigrate?
You can apply to SARS to withdraw your retirement annuity early if you've formally emigrated for tax and exchange control purposes. The withdrawal will be subject to tax, and you'll need to provide proof of emigration.
Can I have more than one retirement annuity at the same time?
Yes. You can have multiple retirement annuities with different providers. Your total contributions across all funds are subject to the same annual limit (27.5% of taxable income, capped at R350,000), but having multiple funds can offer diversification and flexibility.
This article is for general informational purposes only and is not financial advice. Spring Loans is a registered South African credit provider — please speak to a qualified financial adviser or registered credit provider before making borrowing decisions.
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Spring Loans is a registered South African credit provider. Visit www.springloans.co.za to check your eligibility and apply online.
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