Your retirement savings is undoubtedly one of the most important investments you’ll make in your life, but what happens to this money if you’re planning to emigrate from South Africa? Do you leave it behind? Can you take it with you? Have you even considered it? Many tough choices crop up while you’re planning your relocation, so let’s address some of the most frequently asked questions about pension or retirement savings and unpack your options.
What is the latest news on pension fund withdrawals in South Africa?
From 1 September 2024, new retirement reforms will allow members to access a portion of their South African retirement savings before their official retirement date. In terms of the two-pot pension system, 10% of a member’s retirement fund value or R30 000 (whichever amount is lower) will be seeded into a savings component, which can be accessed by members as needed. There is a minimum withdrawal amount of R2 000, withdrawals will be taxed at marginal rates (as income) and only one withdrawal is permitted per tax year. The remaining funds will be kept in a separate component against the member’s retirement.
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Can you withdraw your retirement savings entirely?
South African tax residents are not permitted to withdraw their pensions or retirement savings early, except after 1 September 2024, which will allow withdrawals from the savings component of the two-pot pension system.
As for withdrawing the full benefit of an individual’s pension or retirement annuity, this is only possible after-tax emigration. This means you will first need to emigrate from South Africa and then cease your South African tax residency with the South African Revenue Service (SARS). Once you have maintained this non-resident tax status for three unbroken years, you will become eligible to access the full amount in your retirement savings. This withdrawal post-emigration is subject to taxation according to the SARS lump sum payment tax table.
Read more:
- Expert insights: When is the right time to surrender your retirement annuity?
- Retirement annuity policy surrender in South Africa: 3 important things for expats to understand.
- The facts on emigration and withdrawing from your retirement annuity before and after 55.
- What’s the difference between a provident fund, pension fund and retirement annuity?
Can you transfer your South African pension overseas?
If you are already withdrawing an income from your retirement annuity or pension fund, you will not be able to transfer your pension out of South Africa because the legislation governing retirement savings does not permit any flexibility or portability of South African pension income. The capital underlying your pension investments cannot be touched either, even if you cease tax residency and these funds must remain in South Africa until the pension capital is depleted or the pension payout obligation ceases.
Not only must the underlying capital remain in South Africa, but the pension income payouts can only take place in a local non-resident bank account. Once the payment has cleared in this bank account, it can then be transferred offshore out of South Africa. This income is also taxed in South Africa because it is sourced locally, and it might also be subject to taxation in your destination country, as well.
Read more:
- What if I only cease tax residency in South Africa after retirement?
- Emigrating after retirement: what you need to know about your Pension or Annuity income.
Transferring your South African pension income or retirement annuity encashment proceeds abroad
The tax clearance processes by which funds are remitted offshore from South Africa have changed and been merged into a single procedure. For the transfer of funds above R1 million out of South Africa, it is necessary to gain prior clearance from SARS in the form of an Approval for International Transfer. This clearance method culminates in a SARS TCS (Tax Compliant Status) PIN that you will need to provide to the bank or service provider facilitating your offshore transfer.
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FinGlobal: retirement annuity encashment specialists
Need some advice on how best to handle your retirement annuity once you’ve emigrated from South Africa? FinGlobal can help. Thousands of South African expats have already trusted us with their tax emigration and South African retirement annuity withdrawals, and we’re ready to provide you with the same convenient, reliable service. Whether you’re still in South Africa, or you’ve already emigrated a number of years ago, we can assist you to access your retirement savings and move them safely offshore.
To chat to us about your specific circumstances and financial objectives, simply leave your contact details below and one of our trusted professionals will be in touch soon.