CORE SERVICES

Retirement Annuity Withdrawal

Access or emigrate your retirement annuity funds, wherever you settle down.

Explain a Annuity?

Retirement annuities in South Africa are governed by the Income Tax Act (58 of 1962). A retirement annuity is usually offered by the insurance industry, as a tax efficient savings product for retirement. 

It’s not linked to employment – however, an employer can also contribute to a person’s retirement annuity. a Retirement annuity means you enjoy a tax deduction in South Africa for contributions made (which is only beneficial if income is earned in South Africa). Access to the funds in the retirement annuity is strictly legislated, so as a rule it’s only accessible after the age of 55 when the retirement date is met. Even then, access could be limited.

Specific fund rules that govern retirement annuities in South Africa will define the retirement date. a General rule is when you reach the age of 55 and then only after completing the administrative requirements to action the retirement. Each fund’s is unique and different and therefore it is important to consult with us for free or your financial adviser, prior to making any decisions and taking any action.

You won’t be able to cash in your retirement annuity until you retire – unless you are totally disabled. In that case, the rules do allow you to "cashout" your retirement annuity.

Once the retirement date is reached you’ll be able to access a maximum of one third of the funds in the retirement annuity as a lump sum. This will be subject to income tax, determined by a tax table specifically applicable to retirement lump sums.

The remaining funds in the retirement annuity must be then used to provide you with a monthly pension for your lifetime, which also is fully taxable. You can also decide to apply the full fund value towards the monthly pension provision. It isn’t compulsory to take a lump sum upon retirement.

If your total retirement interest in the fund is less than R247 500 you are not limited to taking only 1/3 of your savings as a lump sum, you can take the full amount as a cash lump sum, subject to tax.

I haven't Financialy Emigrated.

Numerous South African residents have already departed South Africa without finalizing their financial emigration, as it wasn't as apparent at the time. If you left South Africa without finalizing your financial emigration and you now wish to access your retirement annuity, you will have to financially emigrate and meet all the administrative requirements pertaining thereto.

You can find all the requirements to do you Financial Emigration on our website, or get in touch with one of our advisers. Do not leave this too long. 

Retirement Annuity Rules.

The fund will complete a Request for a Tax Deduction Directive – Retirement Annuity Funds (Form C), which is a form provided to the administrator by SARS.

If you’re in the process of emigrating, you’ll need the following supporting documents:

  • Tax clearance certificate (IT21(a)) – Application Form for Tax Clearance Certificate, and
  • A signed and bank stamped form MP336 (b) – Request for settling in allowance – that was submitted to the Authorized Dealer (i.e. a local commercial bank).

Note: If you’ve already financially emigrated, here’s what you’ll need:

  • The member’s certificate of residency obtained from the relevant tax authority of the country in which the member now resides.  The certificate of residency will only be accepted if it is issued in accordance with the Double Taxation Agreement between South Africa and your country of residence.
  • Copy of the Tax Clearance Certificate – Emigration issued by SARS.
  • If you are unable to produce a Tax Clearance Certificate, an affidavit will be required indicating the reason why the Tax Clearance Certificate cannot be provided.

    The administrative requirements to access funds due to the expiry of a visa:

    The fund will complete a Request for a Tax Deduction Directive – Retirement Annuity Funds (Form C), and the following supporting documents will be required:

    • A copy of the certificate of residency obtained from the relevant tax authority of the country where the member permanently resides;
    • A copy of the passport validating the exit from South Africa;
    • A copy of the South African Visa indicating the expiry date and the applicable paragraph in the definition of “Visa” in S1 of The Immigration Act (13 of 2002) in terms of which the “Visa” was issued.

    Note: If you belong to more than one retirement annuity, there is no rule that forces you to make a withdrawal from all funds at the same time. You can action the withdrawals as and when you find it necessary.

    This can be useful where an emigrant has already used the emigration allowance in the given year and where all excess funds are paid into an emigrant’s capital account. The retirement annuity may provide a better net return than the emigrant’s capital account since there is no income tax payable on the returns generated in the fund. However, each case will be evaluated based on its own merits.

Pension and Other Funds in RSA

You’ve worked hard to get those funds flourishing. Here’s how to cash in your South African pension.

Explain a Pension Fund?

You can only join a pension fund through a company that employs you. With a pension fund, your money is managed by the trustees of your pension fund, and they decide which assets to include in the fund. Your contributions to the pension funds and your employers’ contributions, that you are taxed on are tax deductible up to certain limits.

When you retire, you may take up to a maximum of one third of your savings in a cash lump sum. This cash lump sum is taxable. The balance must be used to purchase an income/annuity, the income/annuity is taxable.

If your total retirement interest in the fund is less than R247 500 you are not limited to taking only 1/3 of your savings as a lump sum, you can take the full amount as a cash lump sum, subject to tax.

If you leave a company before you retire, example where you resign, you may have to move your retirement savings out of the company fund, either to your new company’s fund, or to a preservation fund or to a retirement annuity fund or take a cash payout, the cash payout will be subject to tax.

The growth and income within your fund while you are a member of the fund is tax free. Tax is only payable when you access your funds as discussed above

Explain a Provident Fund?

A provident fund, like a pension, is a retirement fund offered by employers to their employees as part of their contract. It is also governed by the Income Tax Act and the Pension Funds Act. It is intended to provide for future retirement provisions once you reach formal retirement.

Both you, the employee, and the employer, your boss, will contribute to the provident fund. As a result, you’ll both enjoy a tax deduction for contributions made, as prescribed by the South African Income Tax Act. (Note -here, the employee is also referred to as the member of the provident fund.) If you, the member, reach your retirement age, which is generally determined by contract, the provident fund allows for your unlimited access to the fund value.

If you leave a company before you retire, example where you resign, you may have to move your retirement savings out of the company fund, either to your new company’s fund, or to a preservation fund or to a retirement annuity fund or take a cash payout, the cash payout will be subject to tax.

The growth and income within your fund while you are a member of the fund is tax free. Tax is only payable when you access your funds as discussed above.

If you leave a company before you retire, when you resign for example, you may move your retirement savings out of the company fund: to your new company’s fund, or to a preservation fund or to a retirement annuity fund. Or you may a combination of cash and transfer to an approved fund.

How do I access these Funds?

The fund value will be obtained from the fund administrator. Your eligibility to withdraw any lump sum from a fund will depend on:

  • Legislative limitations
  • The specified rules for the fund
  • What type of fund it is
  • Any previous withdrawals you’ve made
  • Your age
  • Your residency status while contributing to/withdrawing from the fund.

A withdrawal application must be submitted to the fund and can be done with our online form. After assessment of your eligibility to receive the cash in the fund, the fund administrator will pay the after tax amount into a South African bank account.

This net amount can then be remitted offshore through our transfer service and using your foreign investment allowance.

To summarize, access to pension/provident and preservation funds, prior to retirement is as follows:

  • Upon resignation from employment, the member can access the full resignation benefit as a lump sum;
  • If the member transferred the resignation benefit to a preservation fund, one withdrawal will be possible from the preservation fund prior to retirement;
  • If the member emigrates or the visa expires prior to retirement, access to a pension or provident fund will be possible due to the resignation taking place (and not on account of the actual emigration);
  • If the member emigrates or their visa expires prior to retirement, access to a preservation fund is possible prior to 1 March 2019 if the one withdrawal option has not been used. After 1 March 2019 the member will be able to gain access to the funds even if the one withdrawal was used prior to emigration/visa expiry.

SARS Tax Clearance

We offer South African expats a convenient tax clearance service. We have a team who only focus on SARS-related work.

Tax Implications of Emigrating from South Africa

Leaving the country doesn’t mean saying goodbye to taxes. SARS still has requirements and your obligations still stay valid until you have financially emigrated. Let us assist you.

SUPPLEMENTARY SERVICES

Financial Emigration

Let us help you get through the process of financial emigration from South Africa and we will be with you every step of the way to transfer your assets.

Retirement Annuity

Everything you need to know on how to cash in your retirement annuity when financially emigrating from South Africa.

Foreign Exchange

There are certain limitations on how much money can be transferred out of South Africa. Leaf Secure will assist you with foreign exchange transfers in and out of South Africa. We have a great team of experts through our partner network.

Tax Refunds

Expats living abroad might qualify for tax refunds back home. Leaf Secure can investigate this for you and advise on how to claim tax back from South Africa.

Tax Clearance

Financial emigration from South Africa starts with a tax clearance certificate from the South African Revenue Service (SARS). Here’s what you need to know to obtain a tax clearance certificate in South Africa.

Tax Exit

Don’t let the tax implications of emigrating from South Africa overwhelm you. We can break it down, step-by-step for you.

Exchange Control

All money transferred out of South Africa is controlled and regulated by the South African Reserve Bank (SARB) who is responsible for the day-to-day administration of exchange control.

Pension Income

A South African pension is heavily legislated, which can make it tricky to deal with if you’ve emigrated from South Africa. Leaf Secure can simplify the process for you.

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