RSA Retail Bonds are an option for those seeking that little extra interest from their strained savings. Effectively, you are lending the government money on a short term basis of 2, 3 and 5 year options where the interest is fixed and you are guaranteed your money back at the end of the term that you choose.

Interest rates are on money market rates are yielding around 8%.

Money market rates are available to those who have the means to qualify. The bank normally requires a minimum balance or a fixed period to earn the higher interest rates found in the money market.

The changes in interest rates affect future RSA Retails Bond rates. Generally speaking, as interest rates fall, bond rates rise. The converse applies. With the recent pause on interest rates by the Reserve Bank the current rates are unchanged.

RSA Retail Bonds are very competitive 

The rates currently on offer are higher than the rates offered by the money market. There are no fees or costs so the rate is clean. Pensioners over 65 can opt to have the interest paid monthly and if you elect the 5 year option you can opt out after 12 months paying a penalty.

2 Year Fixed Rate	8.75%
3 Year Fixed Rate	9.00%
5 Year Fixed Rate	10.00%

So where can you invest in a RSA Retail Bond

Payments can be  through the following means

•	Any branch of the South African Post Office
•	RSA Retail Savings Bond website – www.rsaretailbonds.gov.za If you are under the age of 18 and not married or have not been granted majority status in terms of the Age of Majority Act, you may not apply electronically. The authority of your parents or guardians is required in writing.
•	Directly at the National Treasury – 240 Madiba street, Cnr Thabo Sehume and Madiba streets, Pretoria, 0002.
•	Telephonically – (012) 315 5888 Once you are registered, you will receive a unique reference number that will be used as a reference when payments are made/ transferred into the RSA Retail Savings Bond bank account.

Treasury has a draft proposal before parliament which allows you to access your retirement funds for  emergencies and unforeseen expenses. This may seem like good news as many South Africans were financially strapped during the COVID lock down and could have found some relief if they could unlock their pension funds. In desperation many South Africans actually resigned from their employment so that they could access their pension funds. 

A two pot proposal will come into effect in 2023 but there are pros and cons……

The Upside

All contributions to your retirement funds from 2023 will be split in to two pots with one third into the cash pot and two thirds into your retirement fund pot.. You will be able to access the cash pot once a year with a minimum of R2000. The contributions will still be allowed as a deduction against your taxable earnings every year within the current limits of 27,5% with a maximum of R350 000 per annum.  

The returns will be exempt from tax so the performance will be that much better. 

The new cash pot does not have to be taken. It is there for emergencies and should only be used as a last resort. If not used it can be added to the retirement pot when you decide to go on pension. 

The Downside

When you make the withdrawal it will be subject to tax. So the tax deduction you enjoyed previously on your contributions is paid back.

Many members will be enticed into accessing their funds because of the availbllity. This will have a huge effect on the value of your pension in the future. 

Your current retirement funds are not accessible. Only the pots set up from future contributions made in 2023 onwards will available. 

There is still a way to go before the proposal is finalised. We will have to wait and see…..