Contributions are deductible from taxable income up to a certain limit. Amounts which exceed the limit can be carried forward to later years. Or used to increase the tax-free portion of any lump sums at retirement. Or deducted from your retirement income as if they were current contributions and reduce your taxable income. The fund into which your money is being invested, is in terms of present legislation, not being taxed at all. At retirement you may take up to a third of the proceeds in cash, which could be partially or even totally, tax free. If you dont need the money when you retire, you can leave your investment in your retirement annuity, where it continues to earn returns.