Question:
I have a friend who bought a living annuity from Alexander Forbes. She is unhappy with the service she receives.

Can she transfer the living annuity to another service provider?

She is considering returning to the UK. Is there some way she could transfer the living annuity to a service provider in the UK instead of taking a drawdown in South Africa and transferring it to the UK?

If she must stay with Alexander Forbes, is the South African Reserve Bank likely to permit her to make these transfers regularly?

Answer:
You raise more than one issue in your question, so let’s look at all of them separately.

Firstly, legislation does allow for the transfer of a living annuity from one provider to another on condition that a number of requirements are met. In the event of a transfer, no additional commission or fees may be taken from the actual transferred amount (i.e. the full accumulated investment value must be transferred to the new living annuity). So the answer to your first question is yes, she can transfer her living annuity to another service provider.

You mention that your friend is unhappy with the service she currently receives. When it comes to choosing another living annuity, I suggest she does this after consultation with a Certified Financial Planner. While the client service by the provider is important, the management of the underlying investment within the living annuity is probably the most important factor to consider. A qualified planner will be able to assist her in choosing a living annuity option that suits her specific needs and goals.

With regards to your second question, it is unfortunately not possible for her to transfer the living annuity capital abroad. When you mention that she may return to the UK, I am assuming that she will in fact be emigrating to the UK. If this is the case, her only option will be to continue drawing her income in South Africa (this drawdown is currently allowed at between 2.5 percent and 17.5 percent of the investment value). You don’t mention the source of the living annuity income — does it stem from a retirement annuity or a pension fund? If a retirement annuity is the income source, she may remit the living annuity income abroad if the annuity has been in force for five years prior to her emigration. If a pension fund is the income source, the five-year requirement falls away.

Unfortunately, remitting the living annuity income abroad means that the level of income she will receive in the UK will be subject to the fluctuating Rand/Sterling exchange rate. Again, I strongly suggest that she consults with a Certified Financial Planner in order to have a comprehensive and holistic financial plan put in place that considers all the factors relevant to her situation.

With regards to your final question, we have established that she doesn’t have to stay with Alexander Forbes. She will, however, have to retain her living annuity capital in South Africa. The Reserve Bank’s Exchange Control guide specifically mentions monthly annuity payments being eligible for remittance abroad. I therefore foresee no problem with her transferring these income payments from a South African to a UK bank account as and when they are made.

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