The choice of whether or not to move abroad is obviously a deeply personal one. You may find yourself in this predicament, wondering whether you should pack up and leave South Africa to seek out a new life and better opportunities abroad. Or perhaps you’ve already made the decision – merely finalising the emigration process, or already living abroad.
Thing is, no matter where you may find yourself, as a South African you should have the right to move your money across borders. Of course, financial migration – irrespective of your location – requires that you adhere to certain laws and regulations. Whilst onerous, these regulations can be navigated effectively.
Where should you invest?
The international marketplace is quite volatile at the moment, and many investors are scratching heads, wondering where the best place is to invest their money.
In South Africa, the pending credit downgrade as well as the political atmosphere is sending many people into panic.
On foreign shores, we are watching the U.S. grappling with interest rate adjustments and seesawing political rhetoric as the U.S. Presidential election approaches, while the UK is facing a referendum which could see them stepping out of the European Union (Brexit).
These factors alone are steering investors towards caution, but there are many more, including the state of the Chinese economy, the Middle-East conflict, Greek debt, labour market restructuring in France, and the oil price.
What are the options available to you?
Whether you are still living in South Africa or have moved abroad, there are several benefits to an international financial portfolio.
As a South African resident, international investment makes sense as it helps you spread your risk. Staggering investments across countries and currencies adds an extra layer of protection to your overall investment portfolio.
Improved performance and stability
Additionally, though international markets are rather turbulent they still offer more stability and assurance than the South African market – especially when taking our devaluing currency into account. Offshore investment affords you the opportunity to benefit from international market performance and enhanced currency stability.
Protection against Rand depreciation
Offshore investment can offer you better buying power in the future through foreign exchange protection. By investing offshore, you could potentially increase the value of your money should you exchange your Dollar or Sterling investments back to Rand in future. This is a rare instance in which the depreciation of the Rand could be a benefit to you.
For example, in June 2006 one Australian Dollar will have cost you R5.16, which means an investment of R100 000 will have cost $19 380. Today, one Australian Dollar costs R11.38, which means your R100 000 today will fetch you a mere $8 787. Consequently, your investment value today would have lost almost half of the international buying power it had 10 years ago. Had you invested your money in Australia in 2006, your investment could have been worth $31 666 today (excluding rates and inflation, at an average Australian interest rate of 4.91), which translates to R358 571. (It should be noted, however, that the interest rate in Australia was at its all time high of 17.50% in January 1990, and reached its record low of 1.75% in May 2016, so the gross investment value is merely a ballpark figure.)
The fact remains, even though the interest rate in Australia has tapered off, the value of the Rand against foreign currencies has depreciated significantly over the last decade, and it’s a trend which will probably not change in the long term.
Should this align with your investment view you could therefore take advantage of the depreciation trend and possibly see significant return on investment over time as a result of the weakening Rand.
The value of education
If you are living abroad, or consider sending your children to study abroad, offshore investment simply makes sense. This is because it’s more affordable and easier to pay tuition in the currency of the country where your children will be studying. In addition, studying at internationally accredited institutions will simply open up more vocational doors for your children.
Retirement savings benefits
Some countries offer South Africans the opportunity to increase the value of their retirement savings in the form of pension incentive schemes. The UK, for instance, offers a pension incentive programme which incentivises immigrants for reinvesting their retirement savings in a local pension scheme.
Although you will initially need to pay compulsory SARS withdrawal tax, you could receive a significant pension incentive bonus once your pension has been converted to Pounds and reinvested. Some expats have seen bonuses up to 25% on the initial value of their retirement savings. In addition to this, once your money has been reinvested, the strength of the UK currency could see you earn greater interest on your investment. Depending on the jurisdiction we have also been successful in getting back some of the tax paid in South Africa.
Tax benefits when returning to South Africa
If you have been living and working abroad, you have most likely been earning your money in an offshore currency. Should you decide to return to South Africa at some stage, you can take advantage of various tax opportunities. You will, for instance, be able to receive your international pension tax-free in South Africa, as you are no longer bound by South Africa’s exchange control regulations.
Funding your new life abroad
If you’ve already made the move, you may be experiencing a tight cash flow and reinvesting your funds abroad may not be an option. There are, however, still options available to you. South Africans living abroad can convert their pensions or retirement annuities to cash and transfer the proceeds offshore. These funds can then be used to fund overheads, purchase property, as an additional income to improve your lifestyle or wherever else you have a financial shortfall.
There are different regulations involved for cashing in your retirement savings, depending mostly on the type of fund you wish to encash. But irrespective of which fund you want to transfer offshore – the process is completely legal and a welcome recourse for many Saffas living abroad.
Let Finglobal.com help with your international financial planning
Choosing whether to stay or go is not always easy – there is no one else who can make that decision for you. An international financial portfolio, on the other hand, is something which is becoming more of a ‘when’ than an ‘if’ for many South Africans. Spreading your wealth across countries offers you benefits of lower risk and higher growth through diversification.
As a financial services provider specialising in cross-border finance, finglobal.com has the necessary accreditation, affiliation and experience to ensure that you receive the greatest return on investment and benefit from tax an pension incentives relative to your portfolio.
Leave your financial affairs in the capable hands of a specialist South African expat provider with a 100% success rate – we’ve helped more than 60 000 clients like you with their financial migration.
Simply leave your details and we’ll contact you for a cost- and obligation free consultation.
- speed; using our services means you’ll have your money quicker.
- cost; no up-front payment required.
- security; we’re a licensed financial services provider and Reserve Bank approved foreign exchange intermediary.
- compliance; we tick all the boxes with SARS, the Reserve Bank, your insurers and your bank.
- convenience; we take care of the whole process and provide signature ready, completed documentation.
- value; we provide highly competitive exchange rates.