What are RSA Retail Bonds?

Key takeaways

  • The National Treasury introduced RSA Retail Savings Bonds as an accessible savings product for South African consumers in 2004.
  • The bonds are extremely safe, offer competitive interest rates and have no fees.

  • They cater for people investing for growth as well as those investing for income.

  • Recently, a top-up bond, allowing recurring deposits, was added to the range.

  • You can invest as long as you have a South African identity number, bank account and between R500 and R1000 to put away, depending on which bond you choose to invest in.

RSA Retail Savings Bonds offer an investment that is more secure than a bank deposit, offers interest rates comparable to, if not better than, the bank deposit, and attracts no fees.

These retail bonds were introduced by the National Treasury in 2004. According to the website (https://secure.rsaretailbonds.gov.za/home), they were “designed to be as accessible as possible for the general public to invest their money, while earning secured and market-related returns on their investments”.

Although labelled “bonds”, they are very different from government and corporate bonds which are bought and sold again on financial markets mainly by institutional investors. Read more: What is a bond?

Retail bonds are aimed at the consumer and cannot be transferred or traded. In fact, they work much like a bank fixed deposit, with some variations.


What kinds of bonds can you buy?

The retail bonds cater for investors wanting to grow their investments through compounding returns, as well as for those wanting to invest for an income, such as retirees.

There are three different types of bonds. Two of them – the fixed-rate and inflation-linked bonds – each require an initial lump-sum investment. If you wish to invest more, you can open additional investments, but each deposit is seen as a new investment with its own interest rate and maturity date.

The third bond, a top-up bond for savers who want to make recurring deposits, was introduced by the National Treasury in 2022.


Fixed-rate bonds

These bonds pay a fixed interest rate over terms of two, three or five years. The interest can be reinvested (compounded) or paid out twice annually or monthly.


Example 1: Three-year fixed-rate bond, interest reinvested

Interest rate 8%, inflation rate 6%

Year Capital Interest reinvested
1 R10 000 R800
2 R10 800 R864
3 R11 664 R933
Maturity value R12 592  
Maturity value at today's rand value: R10 612

Example 2: Three-year fixed-rate bond, interest paid out

Interest rate 8%, inflation rate 6%

Year Capital Interest paid out
1 R10 000 R800
2 R10 000 R800
3 R10 000 R800
Maturity value R10 000  
Maturity value at today's rand value: R8 306


Note: these are simplified to show how the bonds work and do not show actual interest or inflation rates and do not include any pro-rata interest calculations. In reality, interest is capitalised or paid out more than once a year depending on your interest option.  You can also use the interest calculator on the RSA Retail Savings Bonds website for interest estimates, https://secure.rsaretailbonds.gov.za/calculator.aspx


Inflation-linked bonds

These are available for terms of three, five or 10 years. Interest is paid out twice annually – you cannot reinvest your interest. The interest rates are lower than fixed-rate bonds, but your capital is linked to the Consumer Price Index inflation rate and the interest payments are calculated on the inflation-adjusted capital. This means that both your capital and your interest income keep pace with inflation over the term of the bond. (See Example 3.)

Example 3: Three-year inflation-linked bond

Interest rate 4%, inflation rate 6%

Year Capital (adjusted annually for inflation) Interest paid out
1 R10 000 R400
2 R10 600 R424
3 R11 236 R449
Maturity value R11 910  
Maturity value at today's rand value: R10 000


Top-up bond

This is a three-year investment at a variable interest rate that is reset quarterly. The three-year term starts on the date of the first deposit. You can add to your initial investment by contributing regularly, say via stop order, or by making occasional contributions whenever you have some cash to spare. This investment is also available to stokvels and other community groups.


Example 4: Top-up bond

Interest rate 8%, inflation rate 6%, topping up by R1 000 at start of years 2 and 3. Note that, although shown in this example to be constant, the interest rate on this bond is variable.

Year Capital Interest reinvested
1 R10 000 R800
2 R10 600 + R1 000 R944
3 R12 744 + R1 000 R1 099
Maturity value R14 843  
Maturity value at today's rand value: R12 490

For current rates on the bonds go to https://secure.rsaretailbonds.gov.za/rates

Rolling over, restarting or switching your investments

At the end of the term, you have the option on any of the bonds to “roll over” your investment for another or different term at the new interest rate.

On the top-up bond you receive a once-off bonus of 0.2% on your investment for rolling over for another term in the same product

An attractive feature of the fixed-rate bond is that, at any time after a year, you can “restart” your investment if the interest rate has improved. For example, if you invest in a three-year bond at an interest rate of 8%, but after a year the rate has risen to 9%, you can restart your bond for a new three-year term at the higher rate.

With the top-up bond, once the balance is over R1 000, you have the option of switching a portion of your savings into either a fixed-rate or inflation-linked bond, provided the remaining balance is at least R250.

What are the minimum and maximum investment limits?

For the fixed-rate and inflation-linked bonds, which require lump-sum investments, the minimum investment is R1 000. The top-up bond has a minimum initial investment of R500 and minimum top ups of R100.

Can you withdraw before the maturity date?

After a year invested in any of the bonds, you are allowed to withdraw all or a portion of your savings, subject to a penalty. The penalty on the withdrawal of an investment older than a year is effectively equal to one interest payment on the early withdrawal amount.

In exceptional cases, Treasury will allow you to withdraw your money within the first year. However, all interest received on the early withdrawal amount will be forfeited as a penalty.

How is your investment taxed?

TIP: Remember the first R23 800 you earn in interest is exempt from tax. For people of 65 years and older the exemption is R34 500.

The RSA Retail Savings Bonds are not tax-free investments and there is no tax-free savings account option.

As with a fixed deposit at a bank, you don’t pay capital gains tax on your investment, but you do pay income tax on the interest you earn.

What are the risks?

This is probably one of the safest investments you can make in South Africa. There’s more chance of losing your money in a bank deposit than there is of losing it in a government bond.

However, there’s what is known as opportunity risk: you lose the opportunity to earn more in a higher-return (albeit higher-risk) investment.

There is also the disadvantage of being locked into the investment for the term, with the prospect of a penalty for early withdrawal.

How can you invest?

Any citizen or permanent resident of the republic who has a valid South African identity number and a South African bank account is eligible to invest. People under the age of 18 must receive parental consent in writing.

You can invest in the following ways:

  • At any branch of the South African Post Office.

  • On the RSA Retail Savings Bond website (https://secure.rsaretailbonds.gov.za).

  • Directly at the National Treasury’s offices in Pretoria: 240 Madiba Street, Cnr Madiba and Thabo Sehume Streets, Pretoria, 0002.

  • Telephonically: 012 315 5888

  • By faxing or emailing a completed application form with supporting documents to 012 315 5675/5314 or queries@rsaretailbonds.gov.za