Relevant Retirement Products

Liquidating the assets and withdrawing the funds from SA can be easy or difficult depending on the type of investment and the personal circumstances of the individual. Retirement policies may be a little trickier to access than other investments, but there certainly is a way. The information below is intended to provide information in layman’s terms.

Retirement Products

There are many policy types (see below), of which the most relevant for this exercise are Retirement Annuities and Preservation Funds. (Please use the Glossary on this page or the FAQ’s in the main menu to see what these products are and how each of them work.)

1. Retirement Annuities (R.A.s)

Formal or Financial Emigration is the only mechanism by way of which an Expat can cash out their RA’s before the age of 55, and in full (not only 1/3). There is no other way to access the funds other than to wait to the age of 55 – and then only getting out a small portion in cash with the balance stuck forever.

Some important notes:

(i) This mechanism can only be utilized whilst the funds are still in a RA; once a partial withdrawal (up to 1/3rd) had been made post-55 years of age and the balance had been transferred to a Living Annuity (compulsory) the funds will be stuck. In that case you will only be able to access and transfer abroad a maximum of 17% of the value each year.

(ii) There is one exception to the rule: If the combined value of your RAs is equal to or less than R247,500.00 it can be withdrawn in full at 55 regardless of your residency status. So if you are very close to turning 55, and if you can wait and are prepared to take the risk of waiting, it may be worth simply cashing the whole thing out after your birthday – instead of going through the Formal Emigration process. (Of course, this assumes that the cumulative value remains below this threshold. ). Ditto if you have already turned 55 – you can simply cash out in full and transfer the lot abroad as SDA or FIA if the value of your RA(s) is below R247,5k – no need to Formally Emigrate. (Importantly: you need to have a valid, green bar-coded ID book, without which you will not be able to follow the allowance route.) This is a simple process, you do not require an expensive intermediary or broker or middleman. Do it yourself, click on Ask Claire below right.

2. Pension, Provident and Preservation Funds
Pre-Retirement

A pre-retirement expat with investments in a pension (or provident) fund back in SA, can simply get funds out by retiring from the fund and cashing in the full value. This money can then be sent abroad under the normal rules for FIA or SDA transfers. Formal Emigration is not required here.

At Retirement

An Expat at retirement age can elect to cash out up to 1/3rd of the fund value. This portion can be taken out by way of normal SDA or FIA transfer. Unfortunately the other 2/3rds will be stuck in a Living Annuity and cannot under current rules be cashed out. Formal Emigration will not assist here.

Post Retirement

On the other hand, if an Expat is already officially retired from the pension fund and did not elect to take out 1/3rd at the time of retirement, there is nothing that can be done except getting a directive to not be taxed – based on tax residency – on the benefit withdrawals made. Formal Emigration will not assist here.

Preservation Fund, no withdrawal ever made

If an Expat had resigned from a previous employer in SA, and had converted his full pension into a preservation fund (i.e. no cash withdrawal had ever been made), the funds can simply be cashed out: make a single, full withdrawal and transfer under FIA or SDA rules. Again, Formal Emigration is not required here.

Preservation fund, one withdrawal made previously

If the funds had been moved to a preservation fund and one withdrawal had already been made, the investment will typically be stuck. But there is a work-around by way of the Formal Emigration route: First have the funds transferred from the Preservation Fund into a new R.A. – a step referred to as a Section 14 transfer – and then cash out the RA by way of Formal Emigration (as described above).

3. Life Policies

Life Policies are insurance products, not retirement savings products. Policies taken out before 2003/4 may include an investment portion, which can technically be claimed upon surrender, but this is typically very small. Formal Emigration is not relevant here.

Note: A Living Annuity can be drawn down over time by withdrawing income at a higher rate than investment growth provides as a way of whittling down the capital value. The maximum rate of withdrawal is 17,5% per annum. This would be the only remaining avenue for the investor already stuck in a Living Annuity who wants to get their funds out as fast as possible.

4. Endowment Policies

Endowments are savings products and are not restricted; South Africans abroad can simply and easily surrender their endowment policies as long as they have not been ceded to a bank (in which case the ceding will require cancellation before funds can be released). Formal Emigration is not required here.

5. Living and Life Annuities

A Living Annuity is a permanent investment, regardless of the residency status of the beneficiary. Once invested these funds remain there until death or depleted (Living Annuity) or death (Life Annuity). Whilst policy surrenders are sometimes technically possible if the investment value had fallen below certain thresholds, there is generally little to be done about a Life Annuity. Formal Emigration will not assist here.

Note: A Living Annuity can be drawn down over time by withdrawing income at a higher rate than investment growth provides as a way of whittling down the capital value. The maximum rate of withdrawal is 17,5% per annum. This would be the only remaining avenue for the investor already stuck in a Living Annuity who wants to get their funds out as fast as possible.

Summary

Expats can utilize the process of Formal Emigration to cash out their Retirement Annuities or Preservation Funds (from which a withdrawal had previously been made.  

What do I need?

Use our free checklist to see what you will require and if your retirement policy qualifies to be cashed out.

How Will E8 Assist Me?

Expatri8 is trusted by South Africans living all over the world to provide sensible, cost-effective solutions to cash out their retirement policies. Find out how.

Please Quote me!

Are you ready to cash out your RA? We will send you a no-obligation quote and explain how the process works, how long it will take and what to expect. Get your cash out without delay!