3 Things for Expats to Consider Before Cashing Out Retirement Annuities

South African expat living abroad? Here’s what you need to think about before you start the process of encashing your retirement annuity and moving your proceeds abroad.

When it comes to your South African retirement annuities, all is not lost simply because you’ve moved to another part of the globe. Tax law amendments made in 2008 have made it possible for South Africans living abroad to turn retirement annuities into cash and transfer the proceeds to their new home countries, without having to wait until the age of 55.

As long as you jump through a multitude of administrative hoops and make nice with the taxman by completing the complicated exchange control process that sees you dealing with SARS, the Reserve Bank, your insurance company (perhaps even more than one!) and a major financial institution, you can turn your South African retirement annuity funds into cash.

What you need to think about before you cash out your retirement annuity?

  1. There are huge benefits to cashing in your retirement annuity and bringing your funds closer to you
  • You are free to access your annuity capital as long as you square it with the state and pay the withdrawals tax liability.
  • You could use this windfall to top up existing retirement funds that you hold in your resident country, bringing you closer to your saving goals.
  • If you plan to retire abroad, cashing in your retirement annuity means you get to use it in the currency you live with every day.
  • Your capital amount will be protected from the Rand’s volatility with the move to your more stable economy, making this a sound financial decision in line with your retirement objective.
  • You’re not forced to reinvest these funds in a local pension, so you can do with your money as you please. You can spend it or reinvest it elsewhere. It’s entirely up to you!
  1. The process of retirement annuity surrender can be complicated and starts with completing the process of financial emigration
  • You can only start this process once you have moved to another country. In other words, you must be a South African expat living abroad.
  • It is beneficial to have a valid South African ID book or smart card. (not compulsory)
  • Your tax affairs will have to be up to date and you will need the correct tax clearance from SARS.
  • You’ll obviously need to be in good financial standing back home with your South African bank and insurance companies, in order to complete the process of financial emigration.
  • You’ll need to declare all of your assets to the South African Revenue Bank as part of the process.

But once you have completed the process of financial emigration you can transfer offshore:

  • The proceeds of your retirement annuity even before 55
  • South African source inheritance
  • The proceeds of assets declared in your emigration application
  • Passive income such as rent, dividends, director’s fees, salary for services rendered in South Africa and income from discretionary or vesting trusts

Our financial services are here to assist you make all of this as smooth and hassle-free as possible.

 What does financial emigration mean for you?

Financial emigration from South Africa is basically an agreement between you and the Reserve Bank where, for exchange control purposes only, the way they treat you changes from resident to non-resident. There is no impact on your citizenship or your right to a South African passport. It is purely a money thing for SARS and SARB.

It’s important to keep in mind the following things about your financial affairs:

  • For exchange control purposes your South African bank account becomes a capital account (previously known as a blocked rand account) subject to regulatory restrictions.
  • Your remaining South African-based assets and account transactions will be supervised by the holding bank.
  • Your tax affairs need be in order and up to date at all times.
  1. It pays to get all your ducks in a row to help you make a more informed decision about your next step

We can obtain all the facts and figures relating to your retirement funds and your various policies and compile a personal online report for you with all the details. The amounts you will be able to transfer abroad will depend on:

  • The rules of your specific fund and the type of fund you have: pension, provident, preservation or deferred member.
  • Any previous withdrawals you might have made and your age.
  • Whether or not you rendered services abroad while you were a resident of South Africa.
  • Whether or not your new and old countries of residence have a Double Taxation Agreement (DTA).

 Make the smart decision to take your money global

Getting a free, no obligation assessment and financial emigration consultation done will arm you with all of the information you need to make the correct decision, and you’ll know how much you can transfer, how long it will take and how much it will cost, before you make the decision.

When you’re ready to tie up those loose ends in your native country, FinGlobal is ready to offer you the complete solution which has already been tried and tested by more than 17,000 South African expats in 80 countries.