RETIREMENT
Plan
B
Offshore opportunities for a new
The types of plans available in these
(and other) jurisdictions include:
generation of retirees
AMY STEADMAN
Offshore investments have previously been regarded as
a luxury for “high-net-worth individuals”, however there
has been a notable increase in the numbers of middle-
class South Africans looking to diversify their assets and
investments as a more secure retirement plan.
O
wning a property offshore can be reward-
ing, however it comes with its own set of
risks. You should be familiar with the prop-
erty market, having conducted extensive research
regarding the offshore property market. It would
be beneficial to have a rental management com-
pany to look after the property for you – placing
tenants and resolving any issues.
Part of your retirement plan could include an
offshore property investment that generates a
consistent income to live off or be the place you’ve
secured for yourself when you finally retire.
Offshore investment opportunities are plenty –
it’s a matter of finding the right place for you. There’s
has been an evident increase in the number of South
Africans looking at offshore investment as part of
their retirement planning.
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OFFSHORE GUIDEBOOK 2020
Benefits
Offshore property investment as a retirement plan is
beneficial in many ways. It offers more opportunity
and protection against currency weakness. Discovery
for example, is a well-known financial institution that
offers various investment options – including the new
Recurring Dollar Endowment Plan. This plan enables
investors to invest US dollars for a minimum of $200 per
month with monthly contributions limited to $4 000. If
you can make a lump-sum investment, the Offshore
Flexible Retirement Plan offers offshore investment
while having access to the money as required.
A real benefit in investing offshore for retirement
is how it allows for diversification. While having a
South African-domiciled investment can be correctly
diversified, you’ll still be locked into rand-based funds
and annuities which have an element of risk involved.
Having a retirement investment offshore in a
currency, such as dollars, diversifies you further.
Qualifying Non-UK Pension Schemes
(QNUPS). A recognised overseas pension
scheme available to British citizens that
reside outside or inside the UK. This is also
often used by South African tax residents
who invest in UK property.
Qualifying Recognised Overseas Pension
Schemes (QROPS). These pension schemes
are recognised by the British government
as suitable vehicles into which UK pensions
can be transferred when a person moves
from the UK. As a result of recent changes in
UK pension legislation, this would only be
an option if the QROPS is established in the
jurisdiction where the person moved to or
the QROPS is established anywhere in the
EU and the person moved to an EU country.
Self-Invested Personal Pensions (SIPPs). A
type of UK-registered personal pension
scheme that may offer more investment
freedom and flexibility at retirement than
conventional UK retirement plans. They
are available for both UK residents and
international tax residents.
40(ee) Retirement Schemes. A type
of personal retirement annuity trust
established in terms of Guernsey legislation.
Many of these plans are specifically
designed for South African tax residents.
Occupational Pension Schemes. A choice of
pension funding structures for companies of
different sizes.
Regular contributions allow you to ride out
currency fluctuations over time and you won’t fall
into a position where you move a large sum of money
offshore and carry the risk of the rand strengthening
from that position. At the end of your investment
term you will be paid out in foreign currency into a
foreign bank account – with the added advantage of
not being subject to further exchange controls.
A foreign currency investment can still be carried
out under South African executorship. Any decision
on how much of your retirement savings should
be based offshore and should fall in line with your
retirement plans. If you plan to retire in another
country, you’ll have easy access to your money when
and where you need it, without transferring it back
and forth through South Africa.
Benefits of Offshore Plans
According to the website of Machrie Brokers
in Trichardt, Mpumalanga, offshore retirement
plans offer the following benefits:
A tax-free income in retirement (rather than
a tax deduction on contributions while
working).
Assets are protected in a safe-haven that
is unaffected by political and economic
turmoil while they enjoy tax-free growth.
On a correctly structured plan, no 20%
estate duty, no 3.5% executor’s fee and no
capital gains tax are charged at death.
The investment is protected from creditors
and will transfer seamlessly to your
nominated beneficiary on your death,
meaning you don’t need an offshore will.
Regardless of where you are in the world,
you can make contributions.
Contributions are very flexible in that you
can tailor them (increase, decrease, make
ad hoc deposits or stop contributions) to fit
your personal circumstances.
How to invest for your retirement
The key to investing in a successful offshore property
is knowing your stuff. Information is available
everywhere, and the more clued up you are on
property trends, the more informed decisions you
can make. You should be aware of the tax and legal
implications of purchasing an offshore property. You’ll
need to look at getting an offshore will and testament
and become familiar with situs tax – tax related
to where the asset is located. There may be estate
duties to be paid, even if you’re not a resident of that
country. South Africa has double tax agreements with
some countries, so you won’t have to pay tax twice.
People are living longer and governments are
beginning to feel the pinch in financing state
pensions and are encouraging people to invest in
private retirement plans while making these plans
more accessible. It’s important to show the genuine
intension for investing offshore and you should have
some good years to go before retirement.
The Isle of Man, Jersey and Guernsey are popular
choices for the establishment of retirement plans
as these islands are self-governing British Crown
dependencies that are neither part of the UK nor
members of the EU.
SOURCES Discovery, IOL, Moneyweb
OFFSHORE GUIDEBOOK 2020
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