LAST week we looked at the fact that South Africans are not saving even if they can afford to (as the Old Mutual Savings Monitor research found), and that they need to save more because of slower economic growth.

We also highlighted the opportunity to save by making the most of your retirement tax concessions before the end of the financial tax year.

This week we focus on the available tax concessions and reasons why we should save for retirement.

With the end of the tax year looming, now is the perfect opportunity to make the most of the tax breaks as an added incentive to save for retirement.

"You may already be saving for your retirement through monthly contributions to your company's retirement (pension or provident) fund.

But if your employer does not offer a retirement fund, you may consider investing in a retirement annuity fund after undergoing a financial needs analysis conducted by a competent financial adviser.

A financial adviser can help you with financial planning that includes making provision for your retirement, while still meeting your current and future needs.

Your adviser will help you compile a separate action plan to ensure you invest in the right retirement vehicle in the most tax efficient way," says Ralph Mupita of Old Mutual.

There are three basic retirement fund vehicles: Pension Fund, Provident Fund and Retirement Annuity Fund.

Pension Fund: The rules of a pension fund must provide that not more than one-third of the retirement interest may be taken as a single payment at retirement while the remaining two-thirds must be re-invested to provide an income for the remainder of your life. (If the total value does not exceed R75000, then the total benefit may be taken in the form of a lump sum.)

On death the full death benefit may be taken in cash. In the case of the member's resignation from the fund before the stipulated retirement age, the entire benefit can be withdrawn in the form of a lump sum.

But Old Mutual cautions against failing to preserve your retirement savings on withdrawal as this could lead to a shortfall at retirement.

Provident Fund: The rules of a provident fund may allow for the member to take the full benefit in the form of a lump sum in the event of retirement or death.

Old Mutual recommends that you speak to your financial adviser before you retire to ensure that you have a financial plan in place that will preserve your capital and ensure peace of mind for the remainder of your life.

Retirement Annuity Fund: The rules of a retirement annuity fund are similar to the rules of a pension fund.

Not more than one-third of the total retirement interest may be taken as cash and the remaining two-thirds must be re-invested to provide you with an income for the rest of your life. (The entire amount can be taken in cash if the total value does not exceed R50000.)

"When you qualify for a refund from Sars in a year of assessment, you can use the money to make a tax-deductible lump sum injection into your retirement annuity fund up to a maximum of 15percent of your non-retirement funding income.

"The following year, when you receive your refund from Sars based on your retirement annuity and or pension fund contributions, you can invest it in a flexible savings vehicle such as a Linked Investment Service Provider product, endowment plan or unit trust.

"The reason for this is that the size and timing of each refund will differ from year to year so that it is impossible to commit to a fixed amount in advance," Mupita continues.

"Your discretionary savings will feel as if they are costing you nothing because you invest your refund, helping to ensure that you have enough money to retire comfortably one day.

"You could also use the cash back to fund medical aid contributions, and again enjoy tax relief."

lFor more information on retirement visit www.oldmutual.co.za or SMS the word retire to 32868.