The 2026 tax year for individual taxpayers is closing on 28 February, and many taxpayers look for legitimate and effective ways to reduce their tax liability while building long-term financial security. One of the most powerful tools available is topping up your retirement annuity (RA) in January or February, before the end of the tax year.
A well-timed lump-sum contribution not only strengthens your retirement savings but can also deliver immediate tax benefits.
How RA Contributions Reduce Your Taxable Income
Contributions to a retirement annuity are tax-deductible, allowing you to reduce your taxable income for the year.
You can deduct up to:
- 5% of the greater of your taxable income or remuneration,
- Capped at R350,000 per year.
Any contribution made before 28 February can still be included as a deductible contribution for that specific tax year.
This means a lump-sum top-up in January or February lowers your taxable income, which results in direct tax savings, and may increase your tax refund or reduce the amount you owe SARS. Because the saving matches your marginal tax rate, the higher your tax bracket, the greater the immediate benefit.
The Strategic Advantage of Contributing Early
Beyond tax efficiency, topping up your RA early also has long-term investment benefits:
- You maximise your allowable tax deduction
A top-up ensures you make full use of the 27.5% deduction limit, especially if you haven’t contributed enough through the year.
- You potentially increase your tax refund
Because the contribution is tax-deductible, SARS may owe you a larger refund, effectively giving you back a portion of your investment.
- You unlock more compounding growth
Investing earlier means your money remains invested for longer.
Those extra weeks or months in the market give your capital more time to grow, and the impact of compounding over several years can be significant.
What This Means for Your Financial Planning
Topping up your retirement annuity before the tax year-end is one of the few actions that offers both immediate and long-term financial benefits:
- Immediate tax relief through lower taxable income
- Potential increase in your tax refund
- Larger retirement savings over time thanks to compounding
- A disciplined approach to long-term wealth building
To ensure you stay within the allowable contribution limits and optimise your tax position across all retirement funds (RA, pension, and provident), it is always recommended to consult with a qualified tax professional or financial advisor.
Final Thought
A January or February top-up is a strategic move that boosts both your current financial position and your future retirement security. By acting before 28 February, you give yourself the dual advantage of tax savings now and greater investment growth down the line.
If you need help calculating your allowable contribution or understanding how an RA fits into your broader financial plan, professional advice is essential in making the most informed and beneficial decision.
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.