Pension, Provident and Preservation Funds

Do you know what to do with your pension, provident and preservation funds left back home?

South African pension, provident and preservation funds

Were you aware of the options available to you as a South African living abroad? Do you know what to do with your pension, provident and preservation funds left back home? Well, we’ll tell you exactly what your rights are and how you can benefit from transferring the proceeds of your retirement savings offshore.

What is a pension fund?

A pension fund is a pooled retirement fund offered by employers to provide for stable growth over the long term. Generally, people keep their money in their pension funds or transfer it to a preservation fund until retirement age, when they can enjoy a lump sum payout as well as monthly retirement income based on the fund value and annuity rates.

What is a provident fund?

A provident fund is the same as a pension fund save for two big differences:

  • Only employers claim tax deductions on provident fund contributions, which means if employees contribute to these funds themselves, they’ll receive the money back tax-free in retirement
  • They can take their savings as a lump sum on retirement (this will change in March 2016).

What is a preservation fund?

A preservation fund serves as a savings fund into which proceeds from a pension or provident fund are paid. Proceeds are transferred to a preservation fund when an individual leaves the employment of a company due to dismissal, retrenchment or resignation. It preserves retirement investments and is tax neutral.

What is a deferred member of a pension fund?

A deferred member is an individual who previously contributed to an employer’s pension fund and, upon leaving their employment, chose not to withdraw the proceeds. Upon retirement, these members can receive benefits from the fund, or these benefits may be payable to their dependents upon death. A deferred member cannot make a full withdrawal from the fund.

What are the normal withdrawal rules for these funds?

South Africans are generally not allowed to withdraw before retirement with the exception of Preservation funds, which allows for one withdrawal. This rule is in place to encourage individuals to save and have an income on retirement. The exceptions are Death, Disability and Formal Emigration.

Early withdrawal of retirement benefits reduces the tax-free lump sum available at retirement and applies a higher tax rate for the benefit taken on retirement. But quite often early withdrawal is necessary, especially for South African emigrants.

Pre-retirement withdrawals

Amount Tax rate
First R25 000 0%
R25 000 – R660 000 18%
R660 001 – R990 000 27%
R990 001+ 36%

Withdrawal at retirement

Amount Tax rate
First R500 000 0%
R500 001 – R700 000 18%
R700 001 – R1 050000 27%
R1 050 001+ 36%

What can South African emigrants do with these funds?

If you’re a South African living abroad, you can transfer your retirement savings offshore and reinvest it in a new retirement fund. If you’ve made a previous withdrawal from your preservation fund, FinGlobal has a solution to access the balance and transfer it to your offshore account.

Depending on your new country of residence, you may even increase your retirement savings through offshore transfer. In the UK, for instance, tax relief for lump sum contributions to your pension can provide significant benefit in the form of tax relief.

How does it work?

FinGlobal will obtain the facts and figures relating to your funds and compile a personal online report with all the details.

The amounts you can transfer will depend on

  • your fund rules
  • type of fund – whether pension, provident, preservation or deferred member
  • previous withdrawals
  • your age
  • whether or not you rendered services abroad while you were a resident of South Africa
  • whether or not your new country of residence and South Africa have a Double Taxation Agreement (DTA)

We provide a free, no obligation assessment and consultation to ensure you know how much you can transfer, how long it will take and how much it will cost, before you make a decision.

What are the fees?

Our initial consultation to you is cost-free and includes a quotation for our services – fees are fixed and payable only on successful completion of the job.

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Client testimonials

FinGlobal (previously cashkows) assisted me with the extraction and repatriating of my funds from South Africa and they have delivered excellent service. Thank you FinGlobal!!

Theunis Lemmer

I am based in the UK & recently used FinGlobal (previously cashkows) to complete my emigration process from South Africa. They exe’cuted all the necessary requirements to finalise matters with SARS and to surrender various policies I had. They made all the arrangements for the funds to be transferred to my UK bank account and the entire process was efficient and painless. If you’re thinking of emigrating cashkows know their stuff – I’d recommend them.

Maxine Jones

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