You may have heard that South Africans who have emigrated or relocated, may not have financially emigrated (this process is also called formal emigration). This week we will look at why, if you have settled abroad or are planning to do so, you should financially emigrate as soon as you can.
When you financially emigrate, you are viewed as a non-resident by the South African Reserve Bank (SARB) and South African Revenue Service (SARS). One compelling reason for financial emigration is that it allows you to withdraw your retirement savings (before you turn 55) and transfer the after tax capital offshore as soon as the process is completed. You will then be able to reinvest or spend those funds in the country to which you’ve relocated.
Let’s take a look at why it is important for you to consider getting your retirement savings out of South Africa sooner rather than later:
1. You can withdraw your funds without the early withdrawal product penalties.
The withdrawal process means that you can access your retirement annuity capital, less the retirement fund withdrawals tax liability. There are no hidden penalties as is usually the case with early withdrawals.
2. Having access to these funds allows you to add to existing retirement funds
The sooner you withdraw your retirement annuities, the sooner you can add the funds to your existing retirement plan overseas. This is a popular choice for many of our clients. Take note, all money transferred out of South Africa will incur taxation. Upon receipt of your after tax proceeds in South Africa, the funds become discretionary after-tax in the hands of the individual.
3. Hedge against the South African Rand
If you, like many people who emigrate, intend on moving back to South Africa when you retire, you probably intend to draw on your offshore savings in retirement. The sooner you move your capital into a more stable economy, the more likely it is that you will benefit later in life. The benefits of retiring in South Africa and living off a Pound or Dollar retirement plan are immense.
4. It’s better to have your retirement savings in the country were you reside
Before retirement, it would usually be advantageous to structure your retirement savings in the country in which you live. This allows you to administer them efficiently and creates a natural inflation hedge within that jurisdiction, where there is no mismatch between asset and liability. This is vital for proper cash flow management in retirement.
5. It allows better matching of asset to liability in the same currency and market
If you plan on living overseas in your retirement, you probably want your retirement savings in the currency of your adopted home. It can be very difficult to live in the UK and live off of a Rand denominated retirement plan.
6. The sooner you withdraw, the sooner you will have more financial freedom
You can do anything you want with your funds once you have withdrawn them. Pay off your bond, fund your child’s education or even use those funds as start-up capital for a new business venture. By withdrawing your retirement annuities you gain more financial freedom; the sooner you do this, the better.
Source: thesouthafrican.com
Michelle Oztas: 
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