I have a retrenchment package and would like to invest some into a new business and some for retirement.Can you give me some general pointers? (I live in South Africa.)
Firstly there may be some tax implications on your retrenchment package but there are special tax rates applicable to severance benefits. From 1 March 2014 the first R500,000 of a lump sum is not subject to tax, (but this amount could be reduced by lump sum benefits received in the past).
Leave pay and pro-rata bonuses that are paid at the time of the termination of employment do not form part of a severance benefit and are subject to tax at normal rates applicable to individuals.
In relation to retirement planning there are a wealth of options. Dependent on the size of the retrenchment benefit you could invest into a Retirement Annuity (with the advantage of receiving tax relief on your contributions) or you could purchase an Annuity outright which will be used to provide an income. I would recommend speaking to your financial adviser.
When it comes to investing in a new business the world is your oyster. Obviously it is important to weigh up carefully if you are going to have enough left over to retire. The critical part is registering the company correctly. Speak to an accountant who will be able to assist you with this .
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