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Picture: 123RF/PIXEL BLISS
Picture: 123RF/PIXEL BLISS

Question:

If I were to emigrate to an EU country, would I be able to take the full amount in my retirement annuity out? The sum is slightly over R2m (I have not yet started to withdraw).  Would I have to pay any penalty or tax on it? Furthermore, would this fall into the R10m sum or would it be seen as being outside this amount? 

Answer: 

There are a few exemptions for getting access to your retirement funds before turning 55, when a person is allowed to retire. With many South Africans becoming international citizens this topic is increasing in relevance. If you are not sure where you will retire one day, you should consider your options very closely. 

If you were to emigrate before the retirement age, you would be able to obtain access to your retirement portfolios should you register as a nontax resident in South Africa. But there is a three-year lock-in period for any retirement funds to ensure you will remain a nontax resident. You  must have completed your emigration formalities with the South African Revenue Service. 

From a taxation point of view, I would never advise going this route, as you will erode the majority of your retirement funds by incurring tax. 

For any expat or international citizen, I would always recommend optimising your global portfolio. New income earned can be structured directly offshore, while you can still optimise your local portfolio.

With the amendments to regulation 28 of the Pension Funds Act, you are allowed to structure up to 45% in offshore exposure. Together with that, the local equity exposure you will have on the JSE provides additional rand hedges with many companies that are listed on other exchanges and don’t generate their income purely in South Africa. Furthermore, local cash and bond exposure provides excellent diversification and returns. A consumer price index return plus 6% or plus 7% is still beneficial, without the tax implication, which can be avoided. 

I would recommend optimising your local portfolio, and once you reach retirement age you can withdraw a monthly income from this portfolio. A “best of both” scenario can be reached globally. 

I would advise working with a wealth adviser to calculate the tax vs return scenarios, to ensure you are making the best possible decision in your personal portfolio. 

— Elke Brink, R21 Wealth Management Stellenbosch  

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