When South Africans move abroad, many stop contributing to their South African retirement annuity (RA) and leave it in place. Over time the email address on file changes, the adviser who sold the policy retires, and the RA sits in South Africa with nobody keeping an eye on it. We call this an orphaned RA.
The money remains yours, and the law gives you a route to it. The risks come from the distance between you and the fund: lost contact, missing paperwork and decisions left unmade.
What an orphaned South African Retirement Annuity looks like:
Your RA may be orphaned if one or more of these apply:
- You stopped contributing when you left South Africa and have not reviewed the policy since.
- The fund still has your old South African address, cellphone number or email address.
- Your beneficiary nomination dates from before your move, a marriage, a divorce or the birth of a child.
- You have not formally told SARS that you ceased to be a South African tax resident.
Risk 1: The fund loses track of you
South Africa has a large and growing pool of money that belongs to people the financial sector cannot find. The Financial Sector Conduct Authority (FSCA) put unclaimed financial assets at roughly R88.56 billion in its 2022 report, and unclaimed retirement benefits made up 53% of that total.
The FSCA identified the main cause: members change jobs without updating their personal information, administrators keep poor records of their members, and asset managers and fund administrators continue to earn fees from these unclaimed assets. An emigrant who stops engaging with an Retirement Annuity fits that pattern closely.
The rules for unclaimed money may also change.
Risk 2: Your family may struggle to claim if you die
Your RA falls outside your will. When an RA member dies, the fund’s trustees must identify and trace potential dependants and nominees, make a fair and equitable allocation among them, and decide how to pay the benefit. Trustees have up to 12 months from the date of death to complete their investigation. Your beneficiary nomination guides them, but it is not binding.
That process depends on the fund knowing you have died and being able to reach the people who depended on you. If your family lives abroad and the fund’s records point to an old South African address, both steps become harder.
A 2022 case shows how this plays out. A member died in December 2019 without a beneficiary nomination or a will. The fund only learned of his death in March 2022, when a claim was submitted, because his widow did not know he was a member of the fund.
Risk 3: The paperwork for your withdrawal gets harder to gather
Emigrants can access their RA before retirement. A member of a retirement annuity fund who has ceased to be a resident for an uninterrupted period of three years or longer and who has stopped contributing can withdraw the full benefit before electing to retire from that fund.
The route stays open as you age. You retain access to a cessation of residence withdrawal after retirement age, provided you have not yet elected to retire from the fund. The practical risk lies in proving your case. According to SARS, your fund must supply:
- A certificate of residence not older than 12 months, issued by the tax authority of your new country.
- Documents such as passports showing entries and exits from South Africa, or assessments from your new country of residence, to prove the uninterrupted three-year period.
SARS will decline the tax directive application if you tax number is non-compliant or if you have not informed SARS that you ceased to be a resident.
Passports get replaced, foreign tax records move online or into archives, and having to submit tax returns for previous years can be tedious, especially if you haven’t kept good records. The longer an RA sits untouched, the more work it takes to rebuild the paper trail.
Risk 4: Your investment stays set up for a life you no longer live
An RA chosen for a life in South Africa may no longer suit someone earning and spending in another currency. Your options inside the RA are limited: under Regulation 28 of the Pension Funds Act, retirement annuities can allocate up to 45% of funds offshore.
If you choose to retire from the fund instead of withdrawing, you can still receive the income abroad. Reserve Bank guidance indicates that non-residents, including people who have ceased to be South African tax residents, can transfer compulsory annuity income, including living annuity income, offshore, subject to prescribed administrative requirements. Either way, the choice works best when you make it deliberately. Age 55 is the earliest point at which most RA members may elect to retire, and there is no upper age limit.
How to take your Retirement Annuity back under your control
- Update your details with the fund. Give the administrator your current address, email and phone number, and ask for confirmation in writing.
- Review your beneficiary nomination. Update it to reflect your current family, and make sure your dependants know the RA exists and which fund holds it.
- Confirm your tax status with SARS. If you have left permanently and have not yet completed tax emigration, start there.
- Gather your documents now. Collect passport copies, your certificate of residence and foreign tax assessments while they are easy to find.
- Decide what to do with the RA. You can freeze it, keep it invested or withdraw it once you qualify. Each option has different tax and currency consequences.
FinGlobal helps South African expats with tax emigration, RA withdrawals and bringing funds abroad. Contact our team to review where your RA stands.
This article is by Hano Vermaak, Expat Financial Specialist at FinGlobal.