South Africa gives you two main tax-advantaged ways to save for retirement: the Tax-Free Savings Account (TFSA) and the Retirement Annuity (RA). Both are great. They work differently, and the right mix depends on a few specific things about your situation.
The headline difference.
An RA gives you tax back today. Contributions (up to 27.5% of income, capped at R350,000 a year) are deductible, which means you get the tax you would have paid on that money back from SARS. The trade-off: you can't touch the money until age 55, and at withdrawal, the income is taxed at your marginal rate.
A TFSA doesn't give you anything up front. But every rand of growth is tax-free, forever. No capital gains tax, no dividend tax, no income tax on the withdrawals. The trade-off: the contribution limit is modest (R36,000 a year, R500,000 for life).
The three things that decide your mix.
Your marginal tax rate. High earners benefit more from the RA tax deduction today. Low earners benefit more from the TFSA's lifetime tax exemption. The cross-over is roughly around the 26% marginal bracket, but it depends.
Your time horizon. The longer you have, the more the TFSA's compound-tax-free advantage builds. The shorter your horizon, the more the RA's immediate tax relief matters.
Your flexibility needs. If there's any chance you'll need the money before 55, the TFSA's lack of lock-in is worth a lot.
The boring right answer.
For most working South Africans, the honest best plan is usually both. Max the TFSA (R3,000 a month), put the rest of your retirement budget into the RA. This gets you the tax relief today and a tax-free pool you can draw on flexibly in retirement.