MONEY
WHAT HAPPENS TO YOUR RETIREMENT FUNDS WHEN YOU EMIGRATE?
C
hanges to the income tax laws in March 2019 allow members who emigrate
before they reach retirement date more flexibility to withdraw their retirement funds when they leave the country. There are a number of ways people leave South Africa
“
Pensioners may have their retirement income paid to them in the country of residence
to live in another country: entitled to have a pension paid 1. Citizens of South Africa and
”
extended to members of pension
to him or her in the country of
preservation funds. (Provident
permanent residents qualify
emigration. However, a fund
preservation fund members
to officially emigrate. Certain
member, before electing to draw
are allowed to withdraw the full
emigration allowances are
a pension, might prefer to take the
permitted to be taken out the
pension benefit in cash. If a person
country. On emigration, one
was a member of an employer
ceases to be a ‘country resident’
pension or provident fund before
emigrating, a withdrawal benefit
of South Africa.
normal retirement age and decides
of the full lump is not permitted
to emigrate, the member may
and the member may only retire
merely leaves South Africa to
withdraw his or her benefit. There
from age 55. Advice from the
live in another country but does
is no restriction. A member of a
exchange control department of
not officially emigrate, pending
retirement annuity fund (RAF) is
your bank as well as a financial
approval by the South African
not usually allowed to withdraw
adviser should be obtained
Reserve Bank, that person is still
from an RAF before age 55, and
before a decision to withdraw is
considered a ‘country resident’
on retirement is only permitted
made. There are tax implications
and does not qualify for the
one third of the benefit in cash.
and the tax payable might differ
emigration allowances. That
The rest must be used to buy a
depending on the timing of the
person will continue to qualify
pension. An exception applies
withdrawal and where you are tax
for the investment allowances
if a member officially emigrates
resident at the time of withdrawal.
afforded to ‘country residents’.
or the member relocates on the
It is important to note that this
expiry of a temporary resident
does not apply to pensioners who
temporary visas to live in South
visa. In this case, the member may
are already drawing a pension or
Africa do not qualify to emigrate
withdraw the full capital amount.
annuity income. Pensioners may
because they were never
Currently, a member of a pension
have their retirement income
citizens or permanent residents.
preservation fund is allowed
paid to them in the country of
However, they are usually
one right of withdrawal before
residence but may not access the
allowed to take their funds out
retirement. However, from 1 March
underlying capital. •
when they leave South Africa.
2019, the emigration benefit that
A member who emigrates is
applies to RAF members has been
2. If a citizen or permanent resident
3. Temporary residents who have
38
By Jenny Gordon, Head: Retail Legal, Alexander Forbes
SILVER DIGEST // AUTUMN 2019
amount in cash). If a citizen or permanent resident relocates without
First published in MoneyMarketing, January 2019
