Many South Africans living abroad are unaware that their relocation abroad enables them to access certain financial investments like retirement funds a lot earlier than they would be able to if they were living in South Africa. This is possible due to a change in tax legislation that came into effect in 2008.
Access your retirement annuity before you turn 55
A retirement annuity has always been a tax-efficient way to save for your retirement, however most South Africans have to wait until they are 55 before they can access their funds. This is not the case for South Africans living abroad – who have the option to cash in their South African retirement annuity at any age, by completing the financial emigration process.
Once a South African, always a South African
As daunting as financial emigration sounds, it simply means your status, for exchange control purposes with the South African Reserve Bank, changes from resident to non-resident. Financial emigration does not change your status as a South African. You and your family still have the right to South African citizenship and your South African passports. Financial emigration can take place at any time – whether you have recently moved from South Africa or many years after you have chosen to live abroad.
The benefits of cashing in your retirement annuity
Cashing in your retirement annuity and moving your funds abroad affords you with many financial opportunities:
- You can withdraw all your funds without incurring any early withdrawal product penalties as long as you pay the withdrawals tax liability
- You can use your retirement annuity funds for any purpose – whether you wish to top up your existing retirement funds abroad or invest in a new home.
- Withdrawing your funds helps protect them from the volatile effects of the rand – and if you withdraw your funds at a time when the rand is trading strongly against your new currency, you will benefit even further.
- If you plan to retire overseas, withdrawing your retirement annuity means you can utilise it in the currency of your new home, which simplifies life because it allows for the better matching of assets to liabilities when calculated in the same currency.
How to cash in your South African retirement annuity
As mentioned, you need to begin the process of financial emigration in order to achieve retirement annuity surrender. Once the South African Reserve Bank (SARS) has approved your financial emigration status, you need to open a non-resident bank account with the bank that submitted your financial emigration application to SARB.
At this stage you can ask your financial provider to withdraw your retirement annuity. This withdrawal is subject to tax and an application for a tax directive needs to be made to the South African Revenue Service (SARS). Once you have received the necessary clearance from SARS and paid any capital gains tax on your capital assets, you’ll get a tax clearance certificate which lets you make the withdrawal to convert your retirement annuity savings into cash.
The funds can then be placed in your non-resident bank account for you to access at any time.
Simplify the process
It may sound like getting your funds out of South Africa is a complicated process, but at FinGlobal we have simplified the process for thousands of South Africans living abroad. To find out more about how we can help you cash in your retirement annuities, contact us today.