COMMUNITY LIVING
‘ If you are permanently emigrating , it would be best to optimise the permissible offshore allocation in your retirement fund portfolio to hedge against potential rand weakness when you withdraw from your retirement fund . If you intend to return to South Africa , it would be best to preserve your retirement benefit , which can be done through a preservation fund ,’ says Samukelo Zwane , product head , FNB Wealth and Investments .
Cashing it in
This is probably the most appealing option , especially if you need to urgently cover moving expenses , but it can result in a significant tax liability , warn Louis Botha , senior associate in tax and exchange control , and Tshepiso Rasetlola , associate in employment law from Cliffe Dekker Hofmeyr in Cape Town .
‘ If you are emigrating and under the retirement age of 54 years , you will be able to cash out your entire retirement fund benefits , but it will be subject to the relevant tax law . On the other hand , if you are over 55 years old and emigrating , you will be able to access a maximum of one-third of the fund benefits as a cash lump sum , which again will be subject to tax laws . The first R500,000 will be taxed at 0 %, although this limit is expected to increase to R550,000 as per the 2023 Budget . The remaining twothirds must be used to purchase an offshore living or life annuity from a South African insurer ,’ they explain .
Zwane also explains that to access your balance , you will also need to prove that you have been a non-resident for South African tax purposes for at least three consecutive years .
‘ If you have a retirement annuity , you will need to prove that you have been a non-resident for South African tax purposes for at least three consecutive years to access your benefit . This requires you to inform SARS of your tax residence by submitting a declaration that you are ceasing being a South African tax resident .
' However , if you emigrated for exchange control purposes before 1 March 2021 , you will not have to wait out the three-year period to withdraw the full pension amount ,’ he says .
You will also need to apply for a tax compliance status letter from SARS if you are withdrawing and transferring more than R1 million , so you can use your foreign capital allowance ( also known as the foreign investment allowance ). If the amount is more than R10 million , you must obtain approval from the South African Reserve Bank .
Keeping it as is
If you choose to remain a South African tax resident while abroad , you will be able to contribute to your South African pension fund while abroad . The contribution will be deducted from your gross income earned in South Africa and abroad ( worldwide income ).
Monitor the law
Botha and Rasetlola warn that South Africa ’ s retirement regime will change significantly once the two-pot retirement system is implemented , which is intended to come into effect in 2024 .
29 R E T I R E M E N T
‘ This would allow greater flexibility in terms of the amounts that can be withdrawn before retirement , although there will be tax consequences tied to this . If you are considering moving abroad in the next few years , and uncertain what to do with your pension , make sure to keep an eye on developments regarding these rules ,’ they conclude .
Zeenat Moosa Hassan