South Africans currently living abroad have until 28 February 2021 to use formal emigration as an immediate means by which to access their retirement annuities early. Thereafter expats will have to show that they have ceased to be a tax resident for a period of three years before they’ll be allowed to cash in retirement savings and transfer the proceeds abroad. What is this change all about? What do you need to know about emigration and your retirement annuities? Here’s the inside scoop.
South African Retirement Annuity rules: change is coming
Currently, South Africans who formalise their emigration with the South African Reserve Bank are able to cash in their retirement annuities early. The Draft Tax Bill proposes changes that will mean the payment of lump sum benefits from retirement funds will only be allowed when a member of a retirement fund ceases to be a South African resident.
- Non-residence must be maintained for at least three consecutively.
- All individuals who require immediate access to their savings will be affected.
- New emigrants will have to wait for at least three years before they can access their early withdrawal benefits.
- South Africans have until 28 February 2021 to submit their financial emigration applications. After 01 March 2021 when amendments come into effect, Treasury has confirmed that emigrants will have to wait three years before they’re able to access their funds.
Retirement annuity and emigration
If your intention was to buy off your retirement annuity in order to fund your international relocation, the window for you to do so is a tight one. You will have until the 28th of February 2021 to submit your financial emigration application to the South African Reserve Bank. All applications received and approved by this date will be processed in accordance with the current framework for financial emigration from South Africa.
Can I cash in my retirement annuity early?
If you are already living abroad:
- You should complete the process of financial emigration as soon as possible in order to gain immediate access to the early withdrawal benefit on your retirement annuity.
If you are still planning on moving abroad:
- You will need to complete the process of tax emigration and will then be required to wait three years before you will be able to access the early withdrawal benefit on your retirement annuity.
What are my retirement annuity payout options?
Before the age of 55: When you cash out your retirement annuity early due to financial emigration, you are not obliged to spend two-thirds of your funds on purchasing a living annuity. In fact, you can do anything you please with your retirement annuity payout.
As long as you pay the lump sum withdrawal tax mandated by the South African Revenue Service, you can transfer your retirement savings abroad and spend your money as you see fit.
After the age of 55: If you’ve already reached retirement age by the time you wish to complete financial emigration, you will not be able to access the full amount.
- The South African Retirement Annuity fund rules require you to use two-thirds of your funds to provide you with a pension income during your golden years, which is taxable.
- If you haven’t already used your withdrawal benefits, you can then access one-third of your fund value as cash subject to lump sum withdrawal tax.
- It is not compulsory to withdraw one third as cash, and it is possible to use your entire fund to purchase an annuity that will pay out an income once you have retired.
- This income will then be paid into your non-resident bank account before it can be converted into foreign currency and transferred abroad to you.
FinGlobal: retirement annuity encashment specialists
Don’t miss your opportunity to cash in your retirement annuity before the three-year rule kicks in and ties up your money.
Why choose FinGlobal as your financial emigration partner?
- We understand the need for speed: we’ll do everything in our power to get your financial emigration concluded as quickly and effectively as possible.
- We get to know you first: by conducting a personal, free-of-charge assessment, we’re able to provide you with a Personalised Emigration Plan that takes into account your emigration goals and how best to achieve them.
- We’re trustworthy and reliable: your money is in safe hands, and you can rest assured that everything we do is above board and compliant. Take a look at our credentials.
- We don’t charge an arm…or a leg: because our fees are transparent and fixed. You’ll always know upfront what costs you’re in for, and you only pay us upon completion of the agreed service.
Don’t delay! Contact us to get the ball rolling on your financial emigration today.