06/05/2026
The recent updates to Regulation 28 of the Pension Funds Act have fundamentally changed the landscape for retirement planning in South Africa. By increasing the offshore exposure limit to 45% (a single limit regardless of whether the assets are in Africa or globally), the legislation now allows for significantly greater diversification and protection against local currency volatility.
From my perspective, this regulatory shift integrates seamlessly with the Discovery Invest Shared-Value model. By optimizing your portfolio's offshore allocation while utilizing contribution boosts and fee paybacks, you are not just complying with the law; you are actively maximizing the "alpha" generated by tax efficiency and behavioral incentives.
Practical Example: The Cost of Inaction
To illustrate the impact, consider a client earning R1,000,000 annually (taxable income) under the 2026/2027 SARS tax tables.
Scenario A: No Retirement Annuity (RA) Contribution
Taxable Income: R1,000,000
Tax Calculation: R259,783 + 41% of the amount above R887,000
Total Tax (after R17,820 primary rebate): R288,293
Scenario B: Maximum RA Contribution (27.5%)
RA Contribution: R275,000 (27.5% of R1,000,000)
New Taxable Income: R725,000
Tax Calculation: R185,215 + 39% of the amount above R695,800
Total Tax (after R17,820 primary rebate): R178,783
The Difference
Immediate Tax Saving: R109,510
The "Net Cost" of the Investment: While R275,000 was invested into the retirement fund, the client only "felt" a R165,490 reduction in their pocket, as SARS effectively funded the other R109,510.
In this example, failing to contribute represents a loss of R109,510 in liquidity that could have been working for the client in a tax-sheltered, Regulation 28-compliant environment with up to 45% offshore exposure.
*Assuming constant income tax rates and annual maximum RA contributions over 20 years. **Projection assumes R275k invested annually for 20 years with an annualized nominal return of 9%. Tax savings are based on 2026/27 tables for a single taxpayer. Discovery Invest Shared-Value benefits apply to specific products and fund choices. Discovery Invest is an authorized financial services provider.
https://discoveryadviser.co.za/charl-smith
