How RA X-Ray works

RA X-Ray takes the same monthly cost to you and asks what it would grow to in four different places. It covers the saving years only, up to your retirement date. It does not cover how you draw an income afterwards.

The four options

These cost figures are illustrative placeholders based on published industry ranges (gap G4). Replace them under Advanced assumptions with the Effective Annual Cost (EAC) of a real product. Every provider must disclose its EAC under the ASISA standard. The plain account deliberately uses the same cost as the index RA, so comparing those two shows only what the retirement annuity itself does: a tax deduction in exchange for a lock-in.

The same cost to you G1

Money you put into a retirement annuity is tax-deductible (up to 27.5% of income, capped at R430 000 a year). So a R2 000 debit order costs you less than R2 000. RA X-Ray works out your actual tax saving from the 2026/27 tax tables. The plain investment account then receives only what the RA really cost you: the debit order minus the tax saving. All four options therefore take exactly the same amount out of your pocket each month.

Returns and the range of outcomes A1 · A13

Nobody knows future returns, so RA X-Ray simulates 2 000 possible market histories, month by month, using random returns with the expected return and volatility of the chosen portfolio. All four options experience exactly the same markets in each simulation. Any difference between them therefore comes only from costs and tax, never from luck. The cards show the median outcome (half the simulations do better, half worse), and the range shows the 10th to 90th percentile.

The portfolio presets are built from two simple building blocks, stated as expected (average) yearly returns: shares at inflation + 6.5% (volatility 16%) and bonds & cash at inflation + 2.5% (volatility 5%). Because returns vary, money typically compounds a little slower than the average. For the Balanced portfolio that is about inflation + 4.4% before fees. Cautious holds about 35% in shares, Balanced about 65% and Growth about 75%, the Regulation 28 maximum. The presets also set how much of the return arrives as interest and dividends, which is what the plain account pays tax on each year.

By default all four options hold the same portfolio. In reality the plain account can hold more offshore assets, because Regulation 28 caps retirement funds at 45% offshore. You can give it its own portfolio under Advanced assumptions (gap G3).

Tax rules used (2026/27) A4 · A5

Amounts are assumed to rise with inflation over time, so the tax system stays the same in today's money. In practice some limits stayed frozen for years: the R350 000 cap went unchanged from 2016 until it rose to R430 000 in 2026.

Plain account tax while invested (A9). Interest above the yearly exemption is taxed at your marginal rate, and dividends pay 20% dividend tax. Buying and holding unit trusts or ETFs doesn't trigger capital gains tax until you sell.

Penalties on the insurer RA A8

Traditional insurer RAs often pay the adviser's commission up front and recover it from you over the policy term. If you reduce, pause or stop your premiums, the insurer can deduct a causal event charge. For policies sold after 1 January 2009, the law caps this at 15% of the fund value (30% for older policies), and the maximum falls to nothing over the policy term. RA X-Ray uses a simplified version:

charge = maximum % × fund value × share of the premium that was cut × share of the term still to run

A pause counts as cutting the premium to zero. The platform RA, index RA and plain account have no such penalties.

The after-tax view G2 · A11 · A14

RA money hasn't been taxed yet. You pay tax when you take it out. Most of the plain account's money has already been taxed. Comparing raw totals therefore flatters the RAs, so RA X-Ray also shows an approximate after-tax equivalent:

• Retirement annuities: under the two-pot system, one third (the savings pot) is taken as cash and taxed using the retirement lump-sum table, where the first R550 000 is tax-free. The other two thirds must buy a pension. That part is reduced by the average income tax you'd pay on it, estimated from an income of 5% of the pot per year with the over-65 rebates.
• Plain account: drawn down at the same pace as the RA pension. Only the growth part of each withdrawal is a capital gain, and 40% of that gain above the R50 000 annual exclusion is taxed at retiree rates. For modest balances this is often zero, because most of each withdrawal is your own money coming back.

Both estimates assume this is your only income in retirement. If you'll also have an employer pension, the RA's pension income would be taxed at a higher rate, and the R550 000 tax-free lump sum is shared with any other retirement lump sums you take.

What the numbers don't capture

What RA X-Ray leaves out

• Any savings you already have, and whether you should switch an existing RA.
• Withdrawals from the two-pot savings pot before retirement. Since September 2024 an RA is no longer fully locked in: you can withdraw from the savings pot once a year, taxed at your marginal rate.
• Tax-free savings accounts (R46 000 a year, R500 000 lifetime). The project brief defines four options (gap G6).
• Income in retirement, sliding-scale platform fees, loyalty bonuses, guaranteed or smoothed-bonus portfolios, currency moves and random inflation.

All working assumptions

Open questions for the team

Sources

• SARS / National Treasury, Budget 2026 Tax Guide (2026/27 tax tables, deduction cap, CGT, interest exemption, lump-sum tables).
• National Treasury & SARB, Announcement of the new inflation target for South Africa, 12 November 2025.
• Long-term Insurance Act regulations, 5.12 Maximum charge (causal event charges).
• ASISA, Effective Annual Cost standard; provider EAC disclosures (still to be collected, gap G4).
• Allan Gray, Understanding the two-pot retirement system.

Not financial advice. RA X-Ray is an educational tool built for an MBA team project. Its authors are not an authorised financial services provider.