Not sure which investment wrapper is right for you? Learn how discretionary products, retirement savings, and retirement income options support your goals.
When it comes to building wealth, choosing the right investment wrapper is just as important as the investments themselves. Your wrapper determines how your money is taxed, how easily you can access it, and how it supports your goals, whether you’re saving for the short term, building for retirement, or drawing an income in retirement.
Here’s a breakdown of the three main wrappers and how they can work for you.
1. Discretionary Products
(Discretionary Investments, Tax-Free Savings Accounts, Endowments)
Best for: Short- to medium-term goals and wealth building with access as needed.
Discretionary investments are not bound by retirement legislation, which means you enjoy more flexibility. You can contribute when it suits you, and you are able to access your funds if life takes an unexpected turn, as life often does; and discretionary investments are subject to estate duty on death.
What is estate duty? Estate duty is a tax that must be paid upon someone's death. It is calculated based on the value of everything they owned worldwide if they were a South African resident, or on their South African property if they were a non-resident. To determine the amount of estate duty owed, certain deductions are permitted to lower the overall value of the estate, such as debts or expenses.
There is also an exemption of R3.5 million, meaning the first portion of an estate is not subject to tax. For amounts exceeding this exemption, estate duty is charged at a rate of 20% on the first R30 million of the estate's dutiable value, and at 25% on any value above R30 million.
In short, estate duty is a tax on the transfer of wealth after death, and its impact can vary depending on the size and structure of the estate.
2. Retirement Savings
(Retirement Annuities, Pension Funds, Provident Funds, Preservation Funds)
Best for: Saving for retirement in a tax-efficient way.
If your goal is long-term retirement security, retirement savings wrappers are designed to get you there. They allow you to grow your money with powerful tax advantages, but with some trade-offs in terms of access before retirement age.
Below are the key features of this wrapper:
These restrictions are intentional; they protect your retirement money from being spent too early, ensuring you build the foundation for financial independence later in life.
3. Retirement Income
(Living Annuities and Life Annuities)
Best for: Converting your retirement savings into a sustainable income.
Once you retire, the question shifts from “how do I grow my money?” to “how do I make it last?” This is where retirement income wrappers come in. A living annuity gives you flexibility, as you can choose your income drawdown rate between 2.5% and 17.5% annually. Any balance that remains in your living annuity after your death is paid out to your nominated beneficiaries. The trade-off is that you carry the risk of drawing down too much too quickly and running out of money if your investment is not carefully managed.
Drawdown rate? This is the percentage of a portfolio that is withdrawn over a specific period.
On the other hand, a life annuity provides certainty. It pays you a guaranteed income for life, which can be reassuring, but it typically does not pay out to beneficiaries after your death. In addition, you may not withdraw any extra money from a living annuity over and above your chosen income, unless the policy value falls below the legislated minimum amount.
These wrappers are designed to help you turn your retirement savings into a reliable stream of income, but the choice between them and how to structure your drawdown requires careful planning, and that is where you adviser comes in.
The truth is that while a single wrapper can work in isolation, your adviser can really assist in diversifying or combining them effectively. The right mix depends on your goals, timeline, and personal circumstances. That is why having the right adviser by your side is so important. INN8’s advisers are future-focused professionals who are brilliant at what they do.
They combine deep technical expertise with forward-looking insight to help you structure your investments across different wrappers, balancing flexibility, tax efficiency, and income security in a way that is tailored to you. With expert financial advisers supporting you, and INN8 providing the platform, tools and wrapper options, you’re not just selecting a product; you’re shaping a wealth strategy that can evolve with you and support long-term outcomes.
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