Question:
I emigrated to the UK over six years ago and recently became a dual citizen. In South Africa I still have two pots of money tied up in preserver annuity funds with Old Mutual and Liberty Life.

Am I allowed to transfer this money into my new pension investments here in the UK?

Answer:
As it is not clear if you have formally emigrated, I?m going to try to cover the basics as well as I can and hopefully leave you in a position where the basic options around your retirement funds are clear.

When it comes to accessing our South African retirement funds while living elsewhere, the following questions need to be asked:

1. Where is the money at the moment?

   Once we have left the employ of a company (during which time we may have had the option of investing in a Pension- or Provident fund), our retirement funds can be housed in Retirement Annuities, Pension- or Provident Preservation Funds ('Preservers'), Traditional Compulsory Annuities or Living Annuities.

   Traditional Compulsory Annuities or Living Annuities are retirement funds that retirement has already been taken from (in other words, funds 'paying a pension'). We have this option with our retirement annuities, preservers and pension and provident funds once we reach the age of 55. Once we have taken such retirement, it is not possible for us to take these investments overseas. At best, we can apply to the South African Revenue Service and the South African Reserve Bank to export our incomes from these from time to time.

   If you have not yet retired from your retirement funds, you will probably find your retirement savings in either a retirement annuity or a preserver (as is the case with yourself).

   If your money is in a preserver, you will have the option to take a once-off withdrawal from the fund before you retire. This can be any amount up to the full balance of the investment. This withdrawal will be taxed based on the sliding scale below. It is important to remember that these withdrawals are taxed cumulatively. This means that if you make withdrawals from more than one preserver, the next one will pick up on the table where the previous one left off.

   Once you have made your once-off withdrawal, you will not be able to export the balance of your preserver, regardless of your age. You will only be left with the option to retire from this preserver once you?ve reached your retirement age and transfer the proceeds to a Traditional Compulsory Annuity or Living Annuity. From here on, the same rules would apply as set out in the above paragraph covering these vehicles.

   Taxation of retirement lump sums in case of early withdrawal

   For amounts:

   • Less than R22 500, a rate of tax of zero percent

   • R22 500 ? R600 000, a rate of tax of R0 + 18 percent on the amount exceeding R22 500

   • R600 001 ? R900 000, a rate of tax of R103 950 + 27 percent of the amount exceeding R600 000

   • More than R900 0001, a rate of tax of R184 950 + 36 percent of the amount exceeding R900 000

   If your funds are in a retirement annuity, the same rule applies: If you?re younger than 55, you can take the balance of the investment abroad if you emigrate provided that you?re comfortable paying tax based on the above sliding scale. It is important to note that this scale works on a cumulative basis ? each consecutive investment picks up where the earlier left off. You can go up the ladder, but you can?t go back down.

2. Am I older or younger than 55?

   In the above we looked at what your options are before you reach the age of 55. Once you?re 55, you no longer have the option of withdrawing the benefit in your preserver or retirement annuity. By law, you can only take up to one third of the balance of your retirement annuity or pension preservation fund in cash. This sum will be taxed in line with normal retirement rules. In case of a provident preservation fund, you can take the full sum, subject to the same tax constraints. Whatever is not taken has to be invested in either a living annuity or traditional annuity with the same limitations as described under point 1 above.

3. Have I emigrated or am merely living overseas?

   Based on what the answer to the above is, there are different constraints and tax consequences with regard to taking your investments overseas. As these are more complex than this answer allows for, I would advise you to speak to a specialist financial planner to understand what the implications for you would be.

I hope this points you in the right direction. Good luck with the admin!

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