If you’re a South African planning a permanent move abroad, you’ve probably found yourself wondering on more than one occasion: What happens to my retirement annuity if I emigrate? More specifically, can you withdraw money from a retirement annuity before the age of 55 if you leave the country for good?
It’s a common concern for expats. Many people contributing to retirement annuity plans in South Africa assume their funds will remain locked away until retirement, even if they relocate overseas permanently. The good news is that early access is possible. If you formally cease your tax residency through tax emigration from South Africa, you become eligible for an early retirement annuity withdrawal before the age of 55. However, there are strict rules to follow, including a mandatory three-year waiting period and potential tax in South Africa on your retirement annuity withdrawal.
So, if you’re living abroad or planning to relocate permanently, here’s what you need to know about South African retirement annuity withdrawal, and how the rules work for expats.
Top three takeaways for expats on retirement annuity withdrawal
- Early access is possible if you cease South African tax residency. If you complete the SARS tax emigration process and become a non-resident for tax purposes, you may qualify for retirement annuity withdrawal before 55.
- A three-year waiting period applies, but it can be backdated. You must remain a non-resident for at least three consecutive years before applying for your retirement annuity withdrawal in South Africa. In many cases, this period can be backdated to the date you physically left South Africa, provided you have supporting proof.
- Your withdrawal will still be taxed in South Africa. When you cash out your South African retirement annuity fund, the lump sum is taxed according to the retirement lump sum withdrawal tax table, so it’s important to understand the tax on retirement annuity withdrawal in South Africa before proceeding.
Can you withdraw money from a retirement annuity before 55?
Under normal circumstances, the funds accumulated in retirement annuity plans in South Africa are locked in until age 55. This long-term structure is designed to preserve retirement savings.
However, there are limited exceptions. One of the most important for expats is when an individual formally ceases South African tax residency. After completing tax emigration, you become eligible to apply for an early withdrawal from your retirement annuity in South Africa, but only once you have been non-resident for at least three uninterrupted years.
This means that while cashing in a retirement annuity early is possible, it is not always immediate.
Read more: Tax residency and your retirement savings: the key to unlocking your funds.
What is tax emigration and why it matters
While many people still refer to this process as financial emigration from South Africa, the correct term today is tax emigration from South Africa. In simple terms, tax emigration means formally notifying SARS that you have permanently left the country and no longer qualify as a South African tax resident. This step is essential if you want to access benefits such as retirement annuity withdrawal before 55.
When assessing your residency status, SARS will look at several factors, including:
- The ordinarily resident test
- The physical presence test South Africa
- Your intention to remain abroad permanently
The physical presence test requirements focus on how many days you spend in South Africa over specific tax years. If you no longer meet the thresholds and can demonstrate that you have permanently relocated abroad, SARS may confirm that you are no longer a tax resident.
Read more: South African tax residency rules – expats, are you still tax residents of South Africa?
Once your tax emigration from South Africa has been acknowledged by SARS and your status as a non-resident for tax purposes has been confirmed (by means of an official letter), the three-year waiting period required for retirement annuity South Africa withdrawal begins.
Importantly, this three-year period does not always start on the date SARS processes your application. In many cases, it can be backdated to the date you physically left South Africa, provided you have supporting documentation such as travel records or proof of relocation. This can significantly reduce the waiting period before you become eligible for early withdrawal from retirement annuity South Africa.
Read more: Five steps to withdrawing your retirement annuity from South Africa.
The three-year rule explained
One of the most misunderstood aspects of withdrawal of retirement annuity funds is the timing. To qualify for early withdrawal from annuity, you must:
- Complete tax emigration from South Africa
- Remain a confirmed non-resident for at least three consecutive years
- Provide proof of non-residency to your South African retirement annuity fund
This rule applies to all annuities South Africa that fall under retirement annuity legislation.
Can you cash out a retirement annuity after tax emigration?
Yes, once the three-year period has passed, you may apply to your fund for retirement annuity south africa withdrawal. At this stage, many expats ask:
- Can you withdraw money from a retirement annuity?
- Can I cash out my retirement annuity?
- How much can I withdraw from my retirement annuity?
In most cases, you may withdraw the full value as a lump sum. The amount will be paid in Rands, and exchange control rules no longer apply once your non-resident status is confirmed. However, the payment is still subject to South African tax, and must be paid out into a South African bank account, before it can be transferred abroad.
Read more: Retirement annuity payouts abroad: avoid these common mistakes.
Tax on retirement annuity withdrawal in South Africa
Any retirement annuity withdrawal is taxed according to the retirement lump sum withdrawal tax table. SARS applies a progressive rate based on your total lifetime retirement withdrawals.
This means the retirement annuity tax outcome depends on:
- The total value withdrawn
- Any previous retirement or severance lump sums
- The applicable tax thresholds at the time of withdrawal
Your fund will request a tax directive from SARS before paying out the funds. Understanding tax on retirement annuity South Africa is important, as large withdrawals can push you into higher tax brackets.
Read more: Tax on retirement annuity withdrawal in SA – what expats need to know.
FinGlobal: helping expats unlock their retirement annuities
Accessing your retirement annuity South Africa withdrawal benefit from abroad requires careful planning. Right from completing your tax emigration with SARS through to managing the three-year waiting period and tax implications, every step needs to be handled correctly. FinGlobal has already helped thousands of South Africans abroad successfully cash in their retirement annuities, and we’re ready to do the same for you.
If you’re considering cashing in a retirement annuity while living overseas, leave your contact details below and one of our specialists will be in touch to help you plan the best way forward.