How to convert your retirement annuity to cash before you turn 55

If you are a South African living abroad, you’ll be delighted to discover you can turn your South African retirement annuity and various other South African-based savings and investments into cash, even before you turn 55. This opportunity exists because of a change to South African tax legislation in 2008.

The benefits of this for South African expats living abroad are significant:

• You can access the proceeds of your retirement annuities before you turn 55
• As a South African expat you can cash in the full amount
• Your funds can be used for any purpose – whether you choose to invest in property, your children’s education or re-invest for retirement, there are no restrictions
• You eliminate future exchange rate risks due to the volatile South African rand
• You eliminate the risk of any future changes to the pension legislation

Your age-related options

If you are under 55, you can cash the policy in full and transfer the proceeds wherever you choose. Alternatively, you can take no action now and access your funds after you turn 55.

If you are over 55, you can cash the policy in full and transfer the proceeds wherever you choose. Alternatively, you can choose to receive a pension in rands, irrespective of the policy maturation date. If your policy is below R247 500 in value, you can cash the policy in full without having to financially emigrate.

Why financially emigrate?

In order to transfer the proceeds of your retirement annuity offshore before you turn 55, you need to financially emigrate from South Africa. Financial emigration is the process of exiting South Africa financially and simply means that your status – for exchange control purposes – is changed from resident to non-resident with the South African Reserve Bank (SARB). You do not have to give up your passport or your right to reside permanently in South Africa. In fact, you can return and pick up where you left off, should you so choose.

Financial emigration does not stop you from making money in South Africa or moving that money abroad. Your assets in South Africa can still generate an income – which will be placed in your capital account with the banking institution that arranged your financial emigration. When you need the money, you can simply transfer it abroad from this account.

This includes:

• South African source inheritance
• The proceeds of assets declared in your emigration application
• Passive income, i.e. rent, dividends, director’s fees, salary for services rendered in South Africa and income from discretionary or vesting trusts

The next steps

If you are planning on living abroad permanently, accessing your South African retirement annuity before you turn 55 is an option that is open to you. At FinGlobal, we have helped thousands of South Africans abroad navigate the red tape and administrative hurdles that this entails. For more information, contact us today.