Moving abroad is exciting, but if you’ve got a retirement annuity in South Africa, accessing that money from overseas can feel a little overwhelming. Many expats think it’s as simple as clicking “withdraw,” only to discover that retirement annuity withdrawals made from overseas come with rules, taxes, and paperwork that can easily catch you off guard.
The good news? With a bit of planning and the right guidance, you can make your retirement annuity payout abroad smooth, stress-free, and fully compliant — so you can focus on enjoying your new life overseas, not chasing forms or approvals.
Top 3 takeaways on South African retirement annuity payouts for expats
- You need to complete tax emigration before accessing your RA. Just moving abroad doesn’t make you a non-resident for tax purposes. To unlock a retirement annuity payout abroad, SARS must officially confirm you as a non-resident. Without that confirmation, your fund administrator can’t process an early withdrawal from a retirement annuity in South Africa.
- The three-year non-residency rule matters – but it may already be behind you. To withdraw your RA before 55, SARS requires three consecutive years of non-residency. Many expats worry this will delay them unnecessarily. The good news: if you’ve been abroad for years, your tax emigration from South Africa can often be backdated, meaning you could be eligible immediately once your status is updated.
- Plan for taxes, fees, and exchange rates. Even as a non-resident, your retirement annuity withdrawal is taxed in South Africa. Combine that with bank fees and currency fluctuations, and your expected payout can shrink. Planning ahead is key to protecting your hard-earned money.
Read more: Tax Residency and Your Retirement Savings: The Key to Unlocking Your Funds.
Common mistakes expats make when it comes to retirement annuity withdrawals in South Africa
Even the slickest expats can trip up when trying to access their RA from overseas. Most mistakes fall into two buckets: regulatory missteps and financial errors.
1. Regulatory mistakes expats often make
- Assuming moving abroad is enough: One of the biggest mistakes we see is thinking that simply leaving South Africa automatically makes you a non-resident. You must complete the tax emigration process through SARS. It’s official, it’s required, and it’s the only way your fund administrator can release your RA.
- Overlooking the three-year non-residency rule: Many expats think the clock starts when they submit paperwork. In reality, SARS often allows the non-residency period to start from the date you left South Africa. That means if you’ve been abroad for three years or more, you might already qualify for a full withdrawal.
- Trying to withdraw from a living or life annuity: Not all RAs can be cashed in. If your RA has already been converted to a living or life annuity, the capital usually stays in South Africa. Only the income is paid out — with limited exceptions for very small balances
Read more: Five steps to withdrawing your retirement annuity from South Africa.
2. Financial and administrative mistakes
- Not setting up a South African non-resident bank account: Your RA lump sum must first land in a South African account before being transferred abroad. Skipping this step can slow down your withdrawal and create unnecessary headaches.
- Underestimating taxes and penalties: Even non-residents pay retirement lump sum tax. Combine this with possible early termination fees from your fund, and the amount you receive can be less than expected.
- Ignoring currency risks and transfer fees: International transfers come with exchange rate fluctuations and bank charges. These are easy to forget but can have a real impact on your payout.
- Making emotional decisions: Procrastination, panic-selling, or trying to “time the market” can sabotage your long-term plans. Sticking to a strategy and getting expert guidance is the safer route.
Read more: Emigration and your South African Retirement Annuity – let’s talk facts, expats!
Avoid these mistakes when cashing in your retirement annuity
Here’s how you can make your retirement annuity withdrawal from overseas smoother and eliminate any unpleasant surprises:
- Work with a professional: A cross-border financial planner can guide you through tax emigration, withdrawals, and international transfer logistics. They’ll help you avoid mistakes that cost money or time.
- Get your tax affairs in order: SARS checks your tax compliance status before approving withdrawals. Being up to date avoids delays or unexpected rejections.
- Open a South African non-resident bank account: This makes transferring funds abroad easier and ensures your withdrawal meets all legal requirements.
- Keep careful records: Document your departure date, foreign tax residency, and all communications with SARS. Good records make the withdrawal process smoother and faster.
- Plan for taxes, fees, and currency rates: Understand your tax liability, factor in fund fees, and keep an eye on exchange rates. Even small adjustments can make a big difference in the amount you receive abroad.
FinGlobal: retirement annuity encashment specialists for expats
With a little planning and the right support, a retirement annuity withdrawal from overseas doesn’t have to be stressful as it sounds. Completing the process of tax emigration from South Africa, understanding the three-year rule, and planning for taxes and transfers ensures you get the most out of your RA. By taking these steps, you can protect your hard-earned retirement savings and can enjoy the peace of mind that comes with confident retirement planning for expats. After all, your RA is there to support your future – make sure it works for you, wherever you live.
Ready to unlock your retirement annuity in South Africa while living overseas? FinGlobal can walk you through the process, ensuring compliance and efficiency. Leave your details below, and we’ll contact you to discuss the best way to migrate your funds.
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