A retirement annuity (RA) is the main retirement tool for a self-employed tradie, and SARS subsidises it heavily: contributions are deductible up to 27.5% of your taxable income or remuneration, capped at R430,000 a year for 2026/27 (raised from R350,000 in Budget 2026, the first increase since 2016). With no employer fund behind you, what you put away is the whole plan.
Your options without an employer fund
- Retirement annuity: the standard choice. A long-term contract with an insurer or investment platform; contributions are deductible under section 11F, and at retirement the first R550,000 of lump sums (a lifetime figure) is tax free.
- Preservation funds: for parking benefits from an old employer fund or a wound-down company scheme, not for new monthly contributions.
- Pension or provident fund via your own company: only relevant if you incorporate and employ yourself.
The section 11F deduction cap
Your annual deduction is the lesser of:
- 27.5% of the higher of your remuneration or taxable income (excluding retirement lump sums and severance benefits), and
- R430,000
Contributions above the cap are not lost: the excess rolls forward to future years, and anything still unused reduces the taxable part of your retirement lump sum at the end. For most tradies the practical ceiling is the 27.5% test, not the rand cap.
The two-pot system
Since 1 September 2024 every new contribution is split:
- Savings pot (one third): accessible once per tax year, minimum withdrawal R2,000, taxed at your marginal rate when you take it. An emergency valve, not a bonus.
- Retirement pot (two thirds): locked until retirement.
- Vested pot: everything you had before 1 September 2024 keeps the old access rules. A once-off seeding of 10% of your 31 August 2024 balance (capped at R30,000) moved into the savings pot at the start.
Dipping into the savings pot at marginal rates while working is almost always worse than leaving it: the same money taken at retirement could fall inside the R550,000 tax-free lump sum.
The state safety net
If nothing is saved, the fallback is the SASSA Older Persons Grant: R2,400 a month from age 60, R2,420 from 75 (April 2026 figures). It is means tested on income and assets; confirm the current means test figures with SASSA. A working tradie's RA contributions are what keep that from being the retirement plan.
Worked example: R5,000 a month into an RA (2026/27)
A tradie with R400,000 taxable income contributes R60,000 for the year:
- Cap test: 27.5% of R400,000 is R110,000, and the rand cap is R430,000. R60,000 fits comfortably.
- Taxable income drops to R340,000.
- Tax on R340,000: R44,118 plus 26% of R94,900 = R68,792, less the R17,820 rebate = R50,972.
- Tax without the RA (from the R400,000 example in Income Tax for a Self-Employed Tradie): R67,417.
- Tax saved: R16,445, about 27% of the contribution handed back by SARS.
In effect the tradie saved R60,000 for retirement at a net cost of around R43,500. That is the deal section 11F offers every year you trade.
Common mistakes
- Stopping contributions in a thin year instead of reducing them. The deduction only helps in years you actually contribute.
- Raiding the savings pot for non-emergencies. Marginal-rate tax now versus tax-free at retirement is an expensive swap.
- Forgetting the deduction on the IRP6 estimate. RA contributions reduce provisional tax during the year, not just at assessment (see Provisional Tax Explained).
- Treating the bakkie and tools as the pension. Equipment depreciates; it does not compound.
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