Cash in Your Retirement Annuity: An Expat’s Guide

South African expat living abroad? Here’s what you need to know about your retirement annuity, cashing it in and moving the proceeds abroad.

Many South Africans who have emigrated or relocated to other parts of the world, often think that this relocation means leaving everything they once knew behind, including certain financial investments like retirement funds.

This is no longer the case.

All that’s necessary for South African expats living abroad is to complete the process of financial emigration (also called formal emigration).

As daunting as this might seem, it is advisable for you as an expat, to do this as soon as possible once you’re settled in your new corner of the world. Let’s take a look at how this works and what you have to do to cash in your retirement annuity funds.

What you need to know about retirement annuities

You already know that a retirement annuity is one of the most tax efficient ways to save for your golden years and as long as you were a South African citizen, you were unable to touch those funds until the age of 55.

Now that you’re a South African living abroad, you have the option to cash out your retirement annuity funds before you reach the age of 55 by completing the financial emigration process, thanks to changes in tax legislation made in 2008. In fact, there are many benefits to doing so and the money can then be used for any purpose. That’s right. It’s your money and you can do anything with it!

Benefits of cashing in your retirement annuity and moving your funds abroad

• You can withdraw without the early withdrawal product penalties as the withdrawal process allows you to access your annuity capital as long as you pay the withdrawals tax liability.
• Having access to these funds gives you the opportunity to top up your existing retirement funds that you hold abroad, giving you peace of mind for your later years.
• Withdrawing your funds to protect them from the volatile effects of the Rand by moving to a more stable economy is a good idea if you have plans to move back to South Africa and retire by drawing on your offshore savings for your retirement. This means you’ll be able to retire and live off pounds or dollars in your golden years.
• If you plan to retire overseas, withdrawing your retirement annuity means you can utilise it in the currency of your adopted home, which simplifies life because it allows for better matching of assets to liabilities when calculated in the same currency.

 Learn even more about the benefits of financial emigration for South African expats. 

What is the process of cashing in my retirement annuity now that I’m an expat?

You will now have to begin the process of financial emigration in order to achieve retirement annuity surrender. Because you’re cashing out a potentially large sum of money, this means that the South African Revenue Service (SARS), the South African Reserve Bank (SARB), your insurers and a commercial bank will need to get involved, in accordance with South Africa’s exchange control rules.

Each financial institution has their own specific requirements in terms of notice periods and withdrawal procedures, but thankfully you don’t have to complete this process alone. It is advisable to seek professional guidance in doing so, to ensure that you know how much you can transfer, how long it will take and how much it will cost, before you make your decision.

Once you’ve received the necessary clearance from SARS (and paid any applicable capital gains tax on your capital assets), you’ll get a tax clearance certificate which lets you make the withdrawal to convert your retirement annuity savings into cash. Your proceeds will be taxed according to the withdrawal lump sum tax table.

Lump Sum Tax Table

Source: South African Revenue Service

There’s no time like the present to secure your future

When it comes to your financial future (and your financial present!) it’s smart to take the necessary steps to secure the wealth you’ve worked so hard to accumulate, as soon as possible.

While it can seem like getting your funds out of South Africa is a process filled with many, many administrative and regulatory obstacles; at FinGlobal, we’re here to take the stress and bureaucracy out of the equation for you.

We’ve already helped thousands of South Africans embrace their freedom and create a new life and we’re ready to help you cash in your retirement annuities, so contact us today.

Article supplied by FinGlobal.