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Retirement annuities vs life and living annuities

The amount of capital that you can transfer out of South Africa upon financial emigration 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 regard 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 ultimate aim of financing their retirement. In order to encourage these savings, there are certain South African tax incentives that apply when contributing to an annuity.

On retirement, proceeds from RAs 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 who are living abroad and have financially emigrated have been able to access their RAs. A South African who is declared a non-resident by the South African Reserve Bank can have their after tax capital remitted offshore, for onward investment in country of their choosing.

Living annuities and life 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As is the case with RAs, once funds are invested into a living annuity, the capital cannot be withdrawn.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 for taking your money out of South Africa?

All retirement funds and the various products which 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.

For help on getting your funds out of South Africa, click the button below to start your free initial assessment.

 

Contact our financial emigration team

South Africa

Regent Square
Doncaster Road
Kenilworth 7708
Cape Town
t: +27 (0) 21 657 2120

United Kingdom

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

Australia

Suite 8.06
9 Yarra Street
South Yarra
Melbourne VIC 3141
t: +613 (0) 86 514 500

Hong Kong

Level 1102
The Lee Gardens
33 Hysan Avenue
Causeway Bay, Hong Kong
t: +852 3959 8681

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