By Mariette Janse van Rensburg

I spoke to a lady on the phone yesterday, desperate for help. The past 18 months she’s been trying to cash in her retirement annuity in South Africa, without success.

Although she said she knew what is required to complete the process and she had printed all the documents that a friend had sent her, she got stuck at step one… obtaining a SARS tax clearance certificate for emigration purposes. She was devastated when she received all the documents she posted to South Africa 3 months earlier, back in her mailbox, simply because the lady she dealt with at SARS, was on “maternity leave”.

I smiled, yes, this was not the first time we had to step in and assist a client with the “red tape” back in South Africa.  I was silently calculating how much the Rand depreciated over the last 18 months and wondered if she realized how much time is worth, apart from her telephone and other direct costs.  Her investment did not grow much during this period because, like most other retirement funds, she was invested in a conservative portfolio and the management costs were eroding her real return even further.

After my initial questions I also realized that she was not aware of the fact that she might qualify for certain South African tax deductions in the process of en-cashing her retirement annuities. This made me realize that it is critically important for expats to appreciate the fact that they might be losing out on opportunities to claim an additional tax refund from SARS.

After some investigation, in her case, it was established that there was indeed a significant amount that was owing to her by SARS..

For the benefit of other South African expats around the world, I have compiled a checklist that should be considered when you decide to surrender retirement annuities:

1. Get proper financial advice to determine what the early surrender costs (“ penalties”) are when surrendering a retirement annuity before earliest maturity date (usually age 55)
2. Make sure you deal with a registered financial service provider in South Africa so as to enable you to have recourse and enjoy consumer protection
3. Ensure that there are no “undeclared bonuses” on policies which can be sacrificed if you surrender early
4. Establish the estimated South African and your local tax payable on the early surrender
5. Determine possible South African tax refunds due when you surrender policies
6. Consider the time lines of the process by doing it yourself vs making use of the services of South African based specialists
7. Consider the professional fees payable to specialists vs the time and effort to do it yourself or individuals unfamiliar with legislation and tax practices specifically for expats
8. Appreciate the fact that you have to navigate your way through a South African commercial bank, the reserve bank, SARS and the insurance companies in order to successfully ultimately remit your funds offshore.
9. Calculate the risk of losing paperwork between the different institutions as you have to co-ordinate the flow of documents to kick off the various processes.
10. Make sure that you follow the correct sequence of events in the process, as some documents like the tax clearances need to be obtained before emigration applications can be finalized.
11. Get professional advice if you have assets in other legal entities such as a CC, company or trust.  Tax and legislation differs from that of a transfer of an individual’s asset.
12. If you do make use of another party to assist you, ensure that the individual / company assisting you are registered and qualified to give advice and render all services in this regard. (If not, your information might be handed over to a third party without your knowledge or consent)

As this checklist is not exhaustive, it however shows that the process that one need to follow is cumbersome and requires a lot of patience and know-how to make sure you get it right the first time.

finglobal.com offers a FREE financial report and consultation in order to assist you to make informed decisions about your money in South Africa.

The proof in the pudding lies in the eating  – what do you have to lose?