10 Questions to Ask About Retirement in South Africa

And how to plan for the answers

Retirement planning in South Africa used to be reasonably simple to describe. Put away a percentage of your salary, leave it alone, and hope the numbers work out at the end.

That description no longer holds. Tax rules have shifted, inflation has been unpredictable, and the two-pot system changed the structure of every retirement fund in the country. None of it makes planning impossible. It does mean the old approach of contributing and not looking is a poor substitute for knowing where you actually stand.

These ten questions are the ones worth sitting with. Some you can answer from your benefit statement this afternoon. Others will take a conversation. All of them are easier to deal with now than later.

1. What will my income replacement ratio actually be?

Most planning starts from the same benchmark: you will need somewhere between 75% and 80% of your final salary to keep living the way you live now. It is a useful anchor, but it only means something once you measure your own position against it.

Your annual benefit statement is where to start, and the number to look for is not the one printed largest. A total fund value tells you what you have accumulated. What matters is the monthly income that amount will actually buy you when you stop working. If the gap between the two is uncomfortable, you have two levers: contribute more, or work a little longer. Both are easier to pull at 45 than at 60.

2. How am I treating the two-pot system?

Since September 2024, contributions have been split in two. One third goes to a savings component you can reach before retirement. Two-thirds go to a retirement component that stays locked until you get there. Anything you had saved before that date sits separately, in your vested component.

The savings pot was designed as a release valve for genuine emergencies, not as a current account. Every withdrawal removes capital that would otherwise have compounded for decades, and the tax treatment makes it an expensive way to borrow from yourself. Treat it as the last option rather than the easy one, and protect the retirement component without exception.

3. Am I making the most of the tax deduction?

Contributions to a pension, provident or retirement annuity fund are deductible at 27.5% of the greater of your remuneration or your taxable income. The deduction is capped at R430,000 a year — raised from R350,000 with effect from 1 March 2026, the first increase since 2016.

That is a meaningful amount of room, and most people do not use all of it. Because the contribution comes off your taxable income, part of what you save is effectively funded by tax you would otherwise have paid. If you have capacity and are not using it, this is among the simplest adjustments available to you.

4. What do the risk benefits in my fund actually cover?

Most workplace funds carry more than retirement savings. Group life cover, disability income benefits and funeral cover are commonly bundled in, and many members could not say what any of them pay out.

It is worth knowing. Check whether the cover in place would genuinely carry your dependants through, and whether it has kept pace with your circumstances — a bond, a second child and a decade of salary increases all change the answer. It’s also worth understanding how the premiums are funded, because they are paid from somewhere, and that somewhere affects how much your savings grow.

5. Is my investment strategy still right for my stage?

Many members sit in a default life-stage portfolio that shifts them steadily into more conservative assets as they age. The logic is sound — protect capital as retirement approaches — but the timing is generic, and generic does not fit everyone.

Move to safety too early, and you trade one risk for another. Inflation does not stop at retirement, and if you live 25 or 30 years beyond it, a portfolio built to avoid short-term losses may quietly lose you purchasing power instead. Look at what you are actually invested in, and make sure you still hold enough growth assets to outrun South African inflation over the years you expect to need the money.

6. What happens to my savings when I change jobs?

This is where more retirement capital is lost than almost anywhere else. People move employers, see a fund balance, and take the cash. It feels like a windfall at the time.

It rarely is. The withdrawal is taxed on a scale built to discourage exactly this, and the real cost is not the tax — it is the decades of compounding that money will now never do. Preserving the benefit, whether in your new employer’s fund, a preservation fund, or a retirement annuity, keeps the growth running uninterrupted. The same applies to retrenchment, where the pressure to take the cash is greatest, and the long-term cost is identical.

7. Have I planned for medical costs after I stop working?

Medical inflation has consistently run ahead of general inflation, which means healthcare takes a larger slice of your income every year you are retired — at exactly the stage of life you are likely to need more of it.

For many retirees, it becomes the single biggest drain on monthly cash flow, and it is routinely left out of retirement projections altogether. Build your expected medical scheme contributions into the numbers from the start, and look at whether gap cover or a dedicated medical savings arrangement belongs in your plan.

8. Living annuity or guaranteed annuity — which suits me?

At retirement you face a decision that is difficult to reverse. A guaranteed annuity hands your capital to an insurer, which pays you an income for the rest of your life. A living annuity leaves the capital invested in your name while you draw a percentage from it each year.

Certainty against flexibility, in short. A guaranteed annuity removes the risk of outliving your money but gives up access and leaves nothing behind. A living annuity keeps both, and transfers the risk to you — draw too heavily, particularly in poor early market years, and the capital may not recover. Drawdown rates between 4% and 5% a year are commonly cited as sustainable. Model both before you commit, because the choice is effectively permanent.

9. Are my beneficiary nominations up to date?

Retirement fund benefits do not pass through your estate. They are distributed under Section 37C of the Pension Funds Act, which means the fund’s trustees decide who receives what, after identifying everyone who depended on you financially. Your nomination form guides that decision; it does not override it.

Keeping it current still matters a great deal. An out-of-date form slows the process down and leaves trustees working from information that no longer reflects your life. Review it whenever your circumstances change, make sure your administrator has it, and check that it does not contradict your will.

10. Am I ready for retirement in every other sense?

The financial questions are the ones that get asked. They are not always the hardest ones to answer.

Leaving a career that has structured your week for forty years can take away more than an income. Routine goes, and so often does a sense of purpose and a large part of your social life. The people who settle into retirement well are usually the ones who planned what they were retiring to, not only what they were retiring from. Consulting work, a phased exit, something in the community, something you have been putting off — give it the same thought you have given the numbers.

Where this leaves you

Very few people answer all ten of these comfortably, and that is rather the point. Retirement planning in South Africa is not a single decision made at 60. It is a series of small adjustments made over decades, and the value of asking these questions is that it tells you which adjustment to make next.

Answer what you can on your own. For the rest — particularly the annuity decision and anything touching your tax position — speak to a financial adviser who can look at your full circumstances.