Pension fund or endowment?

EXPERT GIVE TIPS ON WHAT TO DO IF YOU HAVE R4 MILLION IN AFTER-TAX SAVINGS

- Marius Fenwick

I have approximately R4 million in after-tax savings. I'm considering either adding this amount to my existing pension fund, which currently holds R12 million, or starting a new endowment policy. I am already contributing to my pension fund above the annual R350,000 threshold.

At 50 years old, still employed, and earning in the 45% tax bracket, which option would be better from a tax perspective?

Dear reader,

Let's consider your current situation: You have R12 million in an existing pension fund and still contribute more than R350,000 per year, R4 million in free reserves, pay tax at the highest rate (45%), and are only 50 years old.

Your decision on how to apply the R4 million will hinge on three questions:

1. At what age do you intend to retire?

2. What do you anticipate your tax rate will be when you retire?

3. How much in free reserves (unconstrained funds) will you have at retirement age?