Imagine you’re Thando, a 45-year-old factory supervisor in Johannesburg. You’ve worked hard for 20 years, but an injury leaves you unable to continue. You’re worried about your future, especially retirement. You’ve heard about disability grants, the new Two-Pot retirement system, and tax breaks, but it all feels overwhelming. This guide is for you—and every South African worker who wants to understand their options, make smart choices, and secure their future. We’ll break down the latest 2024–2025 rules, show you real calculations, compare products from top providers like Allan Gray, Coronation, Satrix, and EasyEquities, and give you clear action steps. Let’s get started.
- What is the Disability Grant in South Africa?
- The Two-Pot System: South Africa’s 2024 Retirement Revolution
- Retirement Annuities in South Africa: How They Work
- Step-by-Step Retirement Planning Guide
- 1. Calculate Your Retirement Needs
- 2. Understand Your Current Savings
- 3. Maximise Tax Benefits
- 4. Consider a Tax-Free Savings Account (TFSA)
- 5. Review Your Investment Choices
- 6. Plan for Withdrawals
- 7. Monitor and Adjust
- Tax Benefits and Deductions: Exact Numbers
- RA vs TFSA: Which Should You Choose?
- How to Choose the Right Retirement Product
- Common Retirement Planning Mistakes to Avoid
- How to Get Started: Action Steps
- Conclusion: Your Next Steps
What is the Disability Grant in South Africa?
If you’re between 18 and 59, a South African citizen or permanent resident, and have a physical or mental disability that stops you from working for more than six months, you may qualify for a disability grant. As of October 2025, the monthly amount is R2,320[1][5]. This grant is meant to help cover basic living costs if you can’t earn an income because of your disability. It’s not a retirement solution, but it’s a crucial safety net if you’re forced to stop working early.
To apply, you’ll need a 13-digit ID, proof of income and assets below certain limits (R86,280 if single, R172,560 if married), and a medical assessment by a state-appointed doctor. The grant can be temporary (6–12 months) or permanent (longer than a year), depending on your condition[4]. Payments are made monthly, usually around the 3rd of each month for disability grants[1].
Disability Grant vs Retirement Planning
The disability grant is vital if you’re unable to work, but it’s not enough to live comfortably, especially as you get older. That’s why it’s essential to understand South Africa’s retirement system, tax benefits, and how to plan for the future—even if you’re relying on a grant right now.
The Two-Pot System: South Africa’s 2024 Retirement Revolution
From 1 September 2024, South Africa’s retirement landscape changed dramatically with the introduction of the Two-Pot System. This reform affects pension funds, provident funds, and retirement annuities (RAs). Here’s what you need to know:
How the Two-Pot System Works
Under the new rules, your retirement savings are split into two “pots”:
- Savings Pot: One-third of your future contributions go here. You can access this money once a year, but only amounts above R2,000. This is designed to help in emergencies without derailing your retirement.
- Retirement Pot: The other two-thirds of your contributions are locked away until retirement. This ensures you have a nest egg for your later years.
Any savings you built up before 1 September 2024 stay in a “vested pot” and follow the old rules—usually, you can’t access them until retirement, unless you resign or are retrenched.
Why This Matters for You
The Two-Pot System gives you more flexibility. If you hit a rough patch—like a medical emergency or job loss—you can tap into your savings pot without cashing out your entire retirement fund. But it’s still crucial to preserve as much as possible for retirement, because the grant and even the savings pot won’t be enough to live on in your 60s and beyond.
Retirement Annuities in South Africa: How They Work
A retirement annuity (RA) is a tax-friendly way to save for retirement. You contribute monthly or lump sums, and the money grows tax-free until you retire. At retirement, you can take up to one-third as a cash lump sum (taxed) and must use the rest to buy a pension (annuity).
SARS Rules and Deadlines
SARS allows you to deduct RA contributions from your taxable income, up to 27.5% of your taxable income or R350,000 per year (whichever is lower). This is a massive tax break—for every rand you put in, you save up to 45% in tax, depending on your bracket.
You must make contributions during the tax year (March to February) to claim the deduction. If you miss the deadline, you can’t carry it over. Always keep your RA certificates for your tax return.
Real Example: Thando’s RA Contribution
Let’s say Thando earns R20,000 per month (R240,000 per year). She decides to save 15% of her salary for retirement, which is R3,000 per month (R36,000 per year). Because this is less than 27.5% of her income (R66,000), she can deduct the full R36,000 from her taxable income. If she’s in the 26% tax bracket, she saves R9,360 in tax each year—effectively, SARS is helping her save for retirement.
If Thando earns R1,500,000 per year, she can only deduct up to R350,000, even though 27.5% of her income is R412,500.
Step-by-Step Retirement Planning Guide
Let’s walk through a practical retirement plan, using real numbers and scenarios.
1. Calculate Your Retirement Needs
Most experts suggest you’ll need about 75% of your final salary to live comfortably in retirement. If you earn R20,000 per month now, aim for at least R15,000 per month after retirement.
2. Understand Your Current Savings
Check your pension fund, RA, or provident fund statements. See how much you’ve saved and what fees you’re paying.
3. Maximise Tax Benefits
Contribute as much as you can to your RA or pension fund, up to the 27.5%/R350,000 limit. This lowers your tax bill and boosts your retirement savings.
4. Consider a Tax-Free Savings Account (TFSA)
A TFSA lets you invest up to R36,000 per year (R3,000 per month), with a lifetime limit of R500,000. All growth and withdrawals are tax-free. It’s a great complement to your RA, especially for medium-term goals.
5. Review Your Investment Choices
Look at the underlying investments in your RA or TFSA. Are they in low-cost index funds, balanced funds, or more aggressive options? Your choice should match your risk tolerance and time horizon.
6. Plan for Withdrawals
Under the Two-Pot System, you can access your savings pot once a year, but think carefully before withdrawing—every rand you take out now is a rand less in retirement.
7. Monitor and Adjust
Review your plan annually. Life changes—promotions, new expenses, health issues—all affect your retirement needs.
Tax Benefits and Deductions: Exact Numbers
Here’s a quick reference table for 2024–2025:
| Product | Annual Contribution Limit | Tax Benefit | Withdrawal Rules |
|---|---|---|---|
| Retirement Annuity (RA) | 27.5% of taxable income or R350,000, whichever is lower | Full tax deduction | One-third cash at retirement, rest as annuity; new savings pot accessible annually |
| Tax-Free Savings Account (TFSA) | R36,000 per year, R500,000 lifetime | No tax on growth or withdrawals | Access anytime, but don’t exceed limits |
| Pension/Provident Fund | Same as RA | Same as RA | Two-Pot System applies; vested rights preserved |
Example Calculation: High Earner
If you earn R1,000,000 per year, you can contribute up to R275,000 (27.5%) to your RA and deduct it from your taxable income. If you’re in the top tax bracket (45%), this saves you R123,750 in tax each year. That’s like getting an instant 45% return on your investment.
RA vs TFSA: Which Should You Choose?
Both RAs and TFSAs are great, but they serve different purposes:
- RA: Best for long-term retirement savings. Big tax break now, but you can’t access the money until retirement (except for the new savings pot).
- TFSA: Flexible—you can withdraw anytime, and all growth is tax-free. Great for medium-term goals or as a supplement to your RA.
Most people should max out their RA first (for the tax break), then use a TFSA for extra savings.
How to Choose the Right Retirement Product
South Africa has many providers, each with different fees, investment options, and service levels. Here’s a quick comparison of some top choices:
| Provider | Fees (approx.) | Investment Options | Special Features |
|---|---|---|---|
| Allan Gray | 1.25% p.a. + performance fees | Active funds, global exposure | Strong track record, good customer service |
| Coronation | 1.15% p.a. + performance fees | Active funds, focus on quality | Consistent long-term returns |
| Satrix | 0.4% p.a. | Index funds (low cost) | Simple, low-cost way to track the market |
| EasyEquities | From 0.25% p.a. | ETFs, shares, RA, TFSA | Easy to use, fractional shares, low minimums |
Look for low fees, a range of investment options, and a provider that makes it easy to monitor your savings. Don’t just chase past performance—consistent, low-cost investing usually wins over time.
Common Retirement Planning Mistakes to Avoid
- Cashing out when changing jobs: It’s tempting to take the cash, but you’ll pay tax and lose decades of growth. Rather preserve your savings in an RA or new employer’s fund.
- Underestimating living costs: Many people think they’ll spend less in retirement, but medical and lifestyle costs often go up.
- Ignoring inflation: Make sure your investments grow faster than inflation, or your buying power will shrink.
- Not reviewing your plan: Life changes, and so should your retirement strategy. Check in at least once a year.
- Taking on too much risk (or too little): Younger savers can afford more risk; those closer to retirement should be more conservative.
How to Get Started: Action Steps
Ready to take control of your retirement? Here’s what to do next:
- Check your eligibility for a disability grant if you’re unable to work—apply at your nearest SASSA office with your ID and medical reports[4].
- Review your current retirement savings—pension, provident fund, RA, or TFSA. Know what you have and what fees you’re paying.
- Set a savings goal—aim to save at least 15% of your income for retirement, more if you started late.
- Maximise your RA contributions to get the full tax benefit (up to 27.5% of income or R350,000 per year).
- Open a TFSA if you have extra savings—it’s flexible and tax-free.
- Choose a low-cost provider like Allan Gray, Coronation, Satrix, or EasyEquities. Compare fees and investment options.
- Automate your savings—set up a debit order so you never miss a contribution.
- Review your plan annually—adjust as your life and the rules change.
- Get professional advice if you’re unsure—a certified financial planner can help you make the most of your money.
- Stay informed—follow trusted financial news and check SARS and National Treasury updates regularly.
Conclusion: Your Next Steps
Retirement planning in South Africa might seem complicated, but it’s really about making smart choices with the options you have. If you’re unable to work, the disability grant is a vital support—but it’s not enough for a comfortable retirement. Take advantage of the Two-Pot System, RA tax breaks, and TFSA flexibility. Choose low-cost, reputable providers, and make saving automatic. Review your plan often, and don’t be afraid to ask for help.
Remember, every rand you save today is a step toward a more secure future. Start where you are, use what you have, and do what you can. Your future self will thank you.
