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Retirement annuity vs living annuity

The amount of capital that you can transfer out of South Africa when you financially emigrate will be determined by whether you have a retirement annuity or a living annuity. Although annuities fall under the classification of retirement products, they are treated differently with regards to tax, accessibility and emigration. Below we compare the different types of annuities and what they mean for you.

Retirement annuities

A retirement annuity (RA) is a pre-retirement investment product. An annuitant contributes funds with the aim of financing their retirement. To encourage these savings, there are certain South African tax incentives that apply when contributing to an annuity.

On retirement, proceeds from retirement annuities and other retirement-saving vehicles, such as pension or provident funds, are usually transferred into a post-retirement annuity. This annuity will then provide an income to the annuitant during retirement.

Since 2008, South Africans abroad who have financially emigrated have been able to cash-in and withdraw their RAs. A South African who is declared a non-resident by the South African Reserve Bank can transfer their capital offshore. While you will still be subject to tax, you now free to invest in the country of your choosing.

Living annuities

With living annuities, the annuitant assumes the responsibility of managing the investment. The capital investment and the withdrawal rate per annum will determine the level of income one can realistically receive from such an investment. This amount is a percentage of the initial capital investment, which is set and adjustable annually. Income is set in the range of 2,5% to 17,5% of the investment per year.

Living annuities are very useful products, but their success is determined by how well the assets perform and the size of the relative annual withdrawals. As is the case with RAs, once funds are invested into a living annuity, the capital cannot be withdrawn. We offer alternative strategies to assist those emigrating or living abroad in gaining access to these types of funds.

Life annuities

Like living annuities, life annuities are post-retirement vehicles. There is, however, a key difference: Where life annuities are concerned, the amassed capital at retirement is used to purchase or buy an income from a life underwriter or insurance provider.

Life annuities are effectively a guaranteed future income stream and cannot be withdrawn. Hence, only future income received from the insurer can be taken out of South Africa as and when received.

What does this mean when taking your money out of South Africa?

All retirement funds and the various products that fall into each category are treated differently from a tax and capital accessibility perspective, both before and after retirement age.

If you have worked and contributed to pension funds or an RA in South Africa and are currently living abroad, you may be able to transfer these funds out of South Africa. Many South African expats don't know that they can cash in and transfer their South African retirement annuities (RAs), pensions and provident funds out of the country. Our financial emigration specialists in South Africa can help you complete your financial emigration quickly and at with transfers at the best possible rate.

Our financial emigration division specialises in:

 

Financial emigration from South Africa

 

Transferring South African RAs and other pensions abroad

 

Transferring South African inheritances offshore

 

Setting up non-resident Rand bank accounts

 

International financial planning

In 2008, legislation changed to allow South Africans who have financially emigrated to access and transfer their retirement annuity capital before it matures. The extracted funds can then be transferred offshore to a destination of their choice.

All South Africans have the annual R1 million single discretionary allowance and R10 million foreign investment allowance (which requires a SARS tax clearance certificate). These can be used for foreign investment and asset transfer without having to financially emigrate. However, if you have a retirement annuity that you would like to cash in, then financial emigration is the only option.

We have offered financial and migration solutions to South Africans abroad and at home for more than two decades. This makes us uniquely equipped to help you navigate through the complex and time-consuming processes that are financial emigration and pension recovery.

 

The key benefits of our service include:

Trusted

We are registered with the FCSA (South Africa), HMRC (UK) and the FCA (Australia)

Experienced

We are an established player in the financial services and immigration industries.

Individual service

You will have a dedicated specialist who will take care of you throughout the process.

Tax services

Experienced tax experts will ensure that we find the most tax-efficient solution possible.

Easy withdrawals

Our good relationship with insurance houses will ensure a hassle-free fund withdrawal.

Forex experts

You will have access to great currency rates when you transfer your funds abroad.

Investment advice

Our wealth division can help you invest your funds in the UK or anywhere else.

Free report

Receive a report on your position with regard to financial emigration and pension recovery.

South Africa

Cape Town

Regent Square
Doncaster Road
Kenilworth 7708 +27 (0) 21 657 2120

Durban

201 The Annex
Ridgeside Office Park
Umhlanga +27 (0) 31 536 8843

United Kingdom

London

Castlewood House
77/91 New Oxford Street
WC1A 1DG +44 (0) 20 7759 7514

Croydon

5-7 Selsdon Road
South Croydon
CR2 6PU +44 (0) 20 7759 7581

Australia

Melbourne

9 Yarra Street
South Yarra
VIC 3141 +613 (0) 8651 4500

Sable International is a trading name of 1st Contact Money Limited (company number 07070528), registered in England and Wales. We are authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (1st Contact Money [PTY] Ltd - FSP no. 41900) and hold an Australian Financial Services License issued by ASIC to deal in foreign exchange (1st Contact Group - AFS License number 335 126).

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