What budget 2024 means for retirement savings

The 2024 Budget was delivered by Finance Minister Enoch Godongwana against the global backdrop of geopolitical tensions, wars in the Middle East and Ukraine, and slowing economic activity.

On the local front, the minister had to consider a stuttering economy, crumbling infrastructure, high unemployment levels, a rapidly deteriorating fiscal position, a general lack of business and investor confidence, cash-strapped households, and the prospects of the upcoming national election.

A tight fiscal situation limits government’s ability to meaningfully improve the local economic growth prospects over the medium term. This creates a challenging environment for savers, investors and retirement funds looking to grow their retirement monies in nominal and real terms.

Households will also struggle to improve their savings rates as bracket creep, lower wage and salary increases, and less disposable income puts further pressure on their monthly cash flow.

Retirement savings challenge

While retirement fund trustees, management committees and the self-employed do not control the outcomes of the budget and the macroeconomic environment, there are various steps they can take to achieve their retirement goals and objectives.

From a retirement fund perspective, trustees and management committees need to ensure their retirement funds are optimally structured for the best outcomes for members at retirement.

These include:

Well-designed benefit packages that allow for the optimal allocation of monthly contributions to the benefits that members require, e.g. avoiding overinsurance at the expense of investment contributions; and

A robust investment strategy that can protect the benefits of retirement fund members while providing access to investment opportunities for real investment growth above inflation.

From an individual perspective, a self-employed person or small business owner needs to ensure these retirement planning elements are in place for themselves and their staff:

Access to a qualified and certified financial planner who can help set goals and provide the necessary advice and guidance on the most effective way to save and invest for retirement;

Use a retirement annuity to maximise the annual tax-deductible retirement contributions, which are limited to the lesser of R350 000 or 27.5% of the higher remuneration or taxable income;

Use a tax-free savings account for any additional savings above your formal retirement savings limit. An annual limit on contributions of R36 000 or a R500 000 lifetime limit applies; and

Preserve retirement savings to the date of retirement by not dipping into your retirement savings as far as you can avoid it.