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Question:
We are relocating to the UK with a 90 percent probability of not returning (my wife has a UK passport).

My pension fund is at R717 000 and my house is paid off. I am inclined to take the pension as cash and take the hard tax knock to start afresh that side.

Is there a better option considering the fact that I feel the rand will continue downward compared to the pound?

Answer:
Emigration brings with it a number of key decisions that require very careful consideration. How to successfully structure and expatriate one’s wealth can definitely be classified as one of those.

The recently promulgated Taxation Laws Amendment Act as well as Pravin Gordhan’s relaxing of exchange controls in his Medium Term Budget Policy Statement holds the key to how current law will judge this scenario — the rest comes down to personal preference and need.

As far as the pension fund is concerned, the two options available are that of withdrawing the full benefit or (assuming you are not of retirement age) transferring to a Preservation Fund. In the case of withdrawal, your pension interest will be taxed according to the following withdrawal table:

  • Less than R22 500 — 0 percent

  • R22 500 to R600 000 — R0 + 18 percent on amount exceeding R22 500

  • R600 001 to R900 000 — R103 950 + 27 percent of amount exceeding R600 000

  • R900 001 plus — R184 950 + 36 percent of amount exceeding R900 000

Assuming only the information provided above, this would equate to a payout of R581 460 after tax (R22 500 x 0 percent / R577 500 x 18 percent / R17 000 x 27 percent = R135 540).

The alternative would be to preserve, wait for retirement age to roll in and then access a maximum of a third in cash at a more favourable tax table (see below) with the balance of the funds being transferred into a Living Annuity for income.

This income would then need to be paid into a blocked rand account and expatriated from time to time at the prevailing exchange rate.

  • Less than R300 000 — 0 percent

  • R300 001 to R600 000 — R0 + 18 percent on amount exceeding R300 000

  • R600 001 to R900 000 — R54 000 + 27 percent of amount exceeding R600 000

  • R900 001 plus — R135 000 + 36 percent of amount exceeding R900 000

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