RA vs TFSA — what are the limits, and which saves more tax?
A retirement annuity rewards you now: contributions come off your taxable income — up to 27.5% of income, capped at R430,000 a year — but the money is locked until at least 55 and taxed on the way out.
A tax-free savings account is the mirror image: no deduction going in (limits: R46,000 a year, R500,000 lifetime), but every rand of growth and every withdrawal is tax-free, forever, and you can reach it anytime.
Two wrappers, two deals with SARS
An RA and a TFSA are both tax shelters — they just shelter opposite ends of the journey. The RA deal: deduct now, pay tax later, when the money comes back as retirement income. The TFSA deal: pay tax now (contributions come from after-tax salary), and never again — no tax on interest, dividends, growth or withdrawals.
So the question isn't which one is "better" in general. It's which deal is worth more for a particular bracket, horizon and need for access — and the arithmetic differs person by person.
The RA deal in numbers
A deduction is worth your marginal rate. Someone in the 31% bracket who contributes R10,000 gets R3,100 back at assessment — the contribution really cost R6,900. In the 45% bracket, the same R10,000 costs R5,500.
The limits for 2026/27: 27.5% of the greater of remuneration or taxable income, capped at R430,000 a year (pension, provident and RA contributions combined). Anything above the limit isn't lost — it carries forward to future years.
The catch is the exit: RA money is locked until at least 55, and when it pays out as retirement income, that income is taxable. The bet built into every RA is that your tax rate in retirement will be lower than your rate today — for most people it is.
The TFSA deal in numbers
- Annual contribution limit: R46,000 (2026/27)
- Lifetime contribution limit: R500,000
- Tax on growth, interest, dividends and withdrawals: none, ever
- Withdrawals don't restore your room — the lifetime limit counts what you put IN, so money taken out can't be re-contributed later without using up limit
- Contributions above the limit are penalised at 40% — the one way to lose badly in a TFSA
Which saves more tax? The honest arithmetic
In the contribution year, the RA wins by definition — it's the only one with a deduction, and the higher your bracket, the bigger the win. The calculator on this page shows that number for your income.
Over decades, the TFSA fights back: its growth compounds entirely outside the tax net, while RA income is taxed on the way out. A young earner in a low bracket gets a small deduction from an RA today but can buy decades of tax-free compounding in a TFSA.
That's why the two aren't rivals in law — only in budget. Many people fund both: the RA for the deduction and the discipline, the TFSA for the tax-free growth and the flexibility.
The access difference is the real difference
The RA's lock-in until 55 is both its constraint and its feature: the money survives every tempting emergency that wasn't one. The TFSA's anytime-access is both its flexibility and its risk: the money is always one bad month from being spent.
Neither property is good or bad on its own — they suit different jobs. Retirement money benefits from being hard to reach; medium-term money can't afford to be.
Try it with your own numbers
Enter your annual taxable income and a planned yearly contribution. The calculator shows the RA deal (tax back this year at your bracket, real cost of the contribution) next to the TFSA deal (no deduction, but a check against the R46,000 annual limit) — the contribution-year arithmetic, using 2026/27 SARS figures. Inputs stay on your device.
Your numbers stay on your device — nothing you type here is sent or stored. This is a generic guideline calculation, not advice. For advice, speak to a vetted, FSCA-registered planner.
Terms used on this page
- taxable income
- The income tax is calculated on, after allowed deductions. For most salaried people it is roughly gross salary minus retirement contributions.
- marginal rate
- The tax rate on your next rand of income — the bracket the top slice of your income falls into.
Reviewed July 2026 · 2026/27 tax year figures