How to withdraw your PPS Retirement Annuity once you’ve left South Africa

One of the most important aspects of migrating your finances abroad after you have completed your international relocation is deciding what to do with your PPS Retirement Annuity (RA). Do you leave it behind and continue paying into your RA in the hopes that you might retire in South Africa one day? Or do you investigate your options for withdrawing your PPS Retirement Annuity early? If you leave it behind and continue paying into your PPS Retirement Annuity, you run the risk that your investment will be exposed to the volatility of the South African Rand. However, if you withdraw your PPS Retirement Annuity as soon as you can, you will be taxed and might have to pay an early withdrawal penalty, but the money will be safely yours and you will be free to transfer it overseas and invest it as you please.

Can you withdraw from or cash in your Retirement Annuity early in South Africa?

Generally speaking, the rules on withdrawing or cashing in your retirement annuity early are very strict. There are only special conditions under which it is possible to access your retirement savings before the age of 55, and none of them are favourable, as they generally involve sickness, death or disability.

However, the one exception to the rule is that you are allowed to cash in your PPS retirement annuity before the age of 55 if you have emigrated overseas and you have ceased to be a tax resident of South Africa. Once you have notified SARS that you have broken tax residency with South Africa, you will be allowed to access your retirement annuity funds after you have maintained your non-resident status for at least three years.

The reason for this three-year waiting period? Simple. It is to prevent South Africans from moving overseas temporarily, cashing in their retirement funds and then moving back to South Africa at a later stage with no savings to fund their so-called golden years.

How do you withdraw from the PPS Retirement Annuity Fund early?

You will be allowed to make an early withdrawal from the PPS Retirement Annuity Fund if:

• The total investment value of all your PPS accounts is less than/equal to R7 000 and you no longer contribute to the PPS Retirement Annuity Fund.
• If you have permanently left South Africa and your emigration has been approved and formalised by the South African Revenue Service (you have followed the procedures and ceased to be a tax resident) or the South African Reserve Bank (you completed financial emigration before 1 March 2021), or
• If you are a non-resident (i.e: a foreigner) who has left South Africa because your work or visit visa has expired, which withdrawal is permissible in terms of the Income Tax Act.

You will need to fill out the Retirement Funds Withdrawal Form from PPS. This acts as your instruction to the Fund that you intended to gain access to your savings. It is important to note at this stage that early withdrawal and retirement are not treated the same for tax purposes.

The Fund Administrator must then submit a tax directive application to SARS on your behalf through eFiling using Form B or Form C, along with the following supporting documentation:

Where you completed tax emigration –

• A letter dated before 1 March 2022 from the Authorised Dealer to confirm that your emigration was recognised by SARB for exchange control purposes.
• A copy of the Tax Clearance Certificate (TCC) issued by SARS in respect of emigration; or
• A copy of the ‘Tax Compliance Status – PIN issued’; or
• An affidavit that explains why a TCC cannot be provided by SARS.
• The certificate of residence obtained from the relevant foreign revenue authority of the country in which you now live.

Where you completed formal emigration –

• A copy of the MP336(b) that has been officiated and signed by an Authorised Dealer / SARB date-stamped before 1 March 2021; and
• A certificate of residence obtained from the relevant foreign revenue authority in the country in which you now live.

What are the tax implications of withdrawing your PPS Retirement Annuity early?

Much like other retirement annuities, when you want to access your PPS retirement annuity early, there may be significant penalties as high as 30% for cashing in your  policy before retirement age.

There is also a significant tax on lump sum withdrawals, so you will have to weigh up your options carefully. However, it could be worthwhile taking the penalty and tax hit to move your retirement savings offshore where you can put them to work at a stronger currency in a more stable economic climate.

FinGlobal: retirement annuity encashment specialists

If you’ve made the decision to withdraw your PPS Retirement Annuity before the age of 55 once you’ve emigrated, FinGlobal can assist. We will help you every step of the way, making sure you know exactly what to expect from a tax perspective. Once you’ve handled the lump sum withdrawal tax payment, we will assist you to transfer the proceeds of your PPS Retirement Annuity overseas, quickly and safely.

To get started with our hassle-free, trusted retirement annuity withdrawal service, please leave your contact details below and we’ll be in touch to assist.