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Offshore investing for South Africans

When one considers that the South African stock market represents less than 1% of the world economy, investing abroad makes a lot of sense. However, traditional methods of accessing the offshore investment universe through offshore trusts have become difficult due to anti-avoidance tax legislation making these vehicles less tax-efficient.

We are licenced both in the UK and in South Africa. As a fully independent firm with access to the full scope of products and the world's leading fund and asset managers, we are able to provide a wide range of offshore investment solutions for South African residence clients.

Offshore investment opportunities for the South African investor

South African investors have a number of options for investing abroad.

We’ve set out the most popular below:

1. Offshore portfolio of FSB approved funds

This option involves investing in a portfolio of offshore funds approved by the FSB. These funds are considerably more expensive that non-FSB approved funds registered in the UK, US or Europe. The platforms offering these funds are also considerably more expensive than their international competition.

2. Offshore portfolio held within a portfolio bond or retirement annuity trust

Both wrappers above offer financial planning benefits. When an investment portfolio is held within these wrappers, an offshore investment adviser can manage the investment on an advised mandate with the wrapper. This allows access to UK and offshore investment platforms and access to the global fund market. The end result is a more sophisticated investment solution at a lower cost with the additional financial planning benefits of the wrapper.

We are able to provide a wide range of offshore investment solutions

How to effectively manage your South African retirement funds

South African expats living abroad are faced with the dilemma of how to manage their South African pension, provident and retirement annuity (RA) funds. These investment vehicles are subject to Regulation 28 in South Africa, which limits the offshore investment exposure of the fund to 25% of the overall investment exposure. This creates a risk mismatch and a currency mismatch for the expat living abroad. There are two options available to such expats:

1. Financial emigration

This involves financial emigration and the extraction of all retirement funds from South Africa to be repatriated to the resident country. This involves with withdrawal is retirement funds and is subject to the withdrawal tax rates.

2. Retirement of pensions into an offshore living annuity

Annuities are not subject to Regulation 28 as they fall under the Insurance Act. Using the asset swap mechanism, we have created an offshore living annuity that allows 85% of the funds to be invested fully offshore in an offshore fund portfolio designed for your specific needs. That offshore portfolio can then be matched to your risk profile and currency of choice.

Why choose an offshore living annuity

Retirement annuities, pension and provident funds in South Africa are all subject to Regulation 28 which restricts the offshore investment exposure of these investment vehicles to 30%. These rules were initially created to protect investors from unregulated offshore investment schemes and ensure that future rand liabilities are matched to Rand investment income.

However, South Africa does not have any structures in place to allow the transfer of a pension offshore to an expats country of residence. South African expats find themselves holding legacy South African pensions, RA’s and provident funds invested in the South African stock and bond markets and fully exposed to Rand volatility. These savings are therefore ‘trapped’ in inappropriate structures.

living annuity

Expats who find themselves within a few years of retirement age might be unwilling to pay the withdrawal tax involved in financial emigration and extraction of these funds. A 20% to 30% tax charge on moving retirement funds is unlikely to be recovered in growth abroad unless the Rand falls by a similar amount. The current withdrawal tax rates are set out below:

Taxable income (R)

Rate of tax (R)

0 – 25 000


25 001 - 660 000

18% of taxable income above 25 000

660 001 - 990 000

114 300 + 27% of taxable income above 660 000

990 001 and above

203 400 + 36% of taxable income above 990 000

Expats close to retirement age might want to consider the option of the offshore living annuity.

The offshore living annuity involves retiring the pension, provident or preservation fund into a living annuity and then transferring that living annuity to a provider able to asset swap the funds offshore. This is called a Section 27 transfer. These swapped funds are then invested into a portfolio designed by our UK wealth advisers specifically for the needs of the client. With the funds swapped and on an offshore investment platform we, are able to use the entire UK and European fund universe to build the appropriate currency matched and risk matched investment solution for you.

This solution is not completely protected from changes to the foreign exchange rate and exchange control regime. A change to the excon regime could require all asset swaps to be reversed. Funds paid our as income need to be paid from the investment portfolio to the South African living annuity provider who then pays the income to your South African Rand account. In conjunction with our forex service, we are able to provide an immediate transfer of those funds abroad into your foreign bank account. The period of time the funds are in South Africa and in Rand they remain exposed to currency fluctuations.  

Taxable income (R)

Rate of tax (R)

0 – 500 000

0% of taxable income

500 001 - 700 000

18% of taxable income above 500 000

700 001 – 1 050 000

36 000 + 27% of taxable income above 700 000

1 050 001 and above

130 500 + 36% of taxable income above 1 050 000

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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 Licence issued by ASIC to deal in foreign exchange (1st Contact Group - AFS Licence number 335 126).

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