Choosing the best retirement annuity in South Africa isn’t about picking the most advertised product or the one your colleague mentioned over lunch.
It’s about understanding how retirement annuities work, what they’re allowed to invest in, what they cost, and whether they suit your stage of life.
We recently launched the Franc Retirement Annuity: a tax-efficient, flexible retirement investment designed to help young South Africans build long-term financial freedom. But before explaining why we chose the fund we did, it’s worth unpacking what actually matters when comparing retirement annuity funds in South Africa.
What is a retirement annuity vs pension fund?
A retirement annuity (RA) is a long-term retirement investment product that offers upfront tax benefits and tax-free growth while your money is invested.
If you’ve ever wondered about the difference between a pension fund and a retirement annuity, the key distinction is this: pension funds are employer-sponsored; retirement annuities are individual and portable.
Many investors prefer a retirement annuity fund over an employer pension or provident fund because it isn’t linked to a specific employer.
With a company pension or provident fund, when you leave a company you need to move your investment to your new employer's fund – or to a preservation fund – which is often a hassle.
A retirement annuity stays with you regardless of where your career takes you.
You’re also not forced to contribute a fixed monthly contribution in most modern RAs. You can increase, decrease, pause or top up as your situation changes.
Regulation 28: Why all retirement annuity funds have investment limits
All retirement annuities in South Africa are governed by a set of rules outlined in the Regulation 28 of the Pension Funds Act. This is the Regulator essentially playing Big Brother so that you or fund managers don’t take undue risks when it comes to your retirement savings.
These rules have softened somewhat in the past 5-10 years to allow certain investments a higher threshold than before.
Some of the main limits include:
- A maximum of 75% of the fund can be invested in local and offshore equities (shares)
- A maximum of 25% of the fund can be invested in property
- A maximum of 15% of the fund can be invested in “private equity” - these are companies not traded on any recognised stock exchange
- A maximum of 45% of the fund can be invested in infrastructure assets
- A maximum of 10% of the fund can be invested in commodities or hedge fund investments
- A maximum of 45% of the fund can be invested in offshore assets (so this will be all types of different asset classes like equities, property, infrastructure etc)
- There are also limitations on exposure to a specific company.
All of these restrictions are there to try ensure the fund is adequately diversified and not taking on too much risk. You don't want your retirement savings to go bust all because of bad investment decisions.
The fund behind the Franc Retirement Annuity: the Sygnia Skeleton Balanced 70 Fund
When launching the Franc Retirement Annuity, one of the biggest decisions was selecting the underlying fund.
The Franc Retirement Annuity invests in a Sygnia retirement annuity: the Skeleton Balanced 70 Fund.
This fund has:
- 70% exposure to local and global equities
- A medium-to-high risk profile
- A diversified allocation across asset classes
What's important to take away from the above is that the fund has a 70% overall allocation to SA and offshore equities.
Why does that matter?
This is below the 75% restriction that Regulation 28 has set but is still at the higher end of the limit – so investors in this fund have sufficient exposure to equities. Equities have historically shown the best growth over the long term, which is what you are looking for when investing towards retirement.
As always, past performance doesn’t guarantee future performance but it is often a very good guide.
Sygnia also offers the Skeleton Balanced 40 and 60 funds, with lower equity exposure. While those may suit investors closer to retirement, we believe younger investors benefit from higher long-term growth potential.
Fees: The most overlooked factor when choosing the best retirement annuity in SA
Costs matter. A lot.
When comparing the best retirement annuity in SA, fees are often the biggest long-term differentiator.
The underlying fund we selected is a low-cost, passively managed fund. The last reported total investment charge was 0.51%, which is much lower than many comparable funds out there. Even after the Franc/admin fee of 0.81% is added it is still much cheaper than many other options.
However, many RAs in the market layer on:
- Adviser commissions
- Administration fees
- Policy fees
- Performance fees
In some cases, these can total 5-10% of your monthly contribution. Over time, that significantly reduces your retirement outcome.
Low fees don’t guarantee better returns. But high fees almost guarantee reduced net returns.
Why some retirement annuities underperform
Retirement annuities sometimes get a bad reputation.
When people compare a retirement annuity fund to a discretionary investment, the RA may appear to have underperformed, even after factoring in the tax deduction.
This usually happens for two reasons:
1. The RA is too expensive
High layered fees eat into long-term returns.
2. The RA is invested too conservatively
Some funds hold excessive exposure to cash or bonds. While Regulation 28 prevents excessive risk, it doesn’t force funds to take enough growth exposure.
Over decades, insufficient equity exposure can materially reduce retirement outcomes.
When selecting our RA, we deliberately considered both risks:
- Low-cost structure
- Strong equity exposure aligned with long-term growth
So, what is the best retirement annuity in South Africa for you?
There isn’t a single “best retirement annuity in South Africa” for everyone.
But there are clear criteria you should look for:
- Low and transparent fees
- Strong long-term growth exposure
- Flexibility in contributions
- Portability (not employer-linked)
- Clear communication and simple access
If you’re young, earning, and serious about building financial freedom, starting early matters more than trying to optimise every detail.
Don’t Overthink Retirement. Start Building It.
The Franc Retirement Annuity is built for young South Africans who want:
- A simple, tax-smart retirement solution
- No lock-ins or adviser requirements
- Start from R125
- Two-Pot compliant structure
- Transparent, all-in pricing
You can set it up directly in the Franc app in minutes.
