Question:
I know many laws regarding retirement annuities have changed, but I am confused as to what these changes entail.

Is it true that the law now allows those who emigrate to take their retirement annuity out of the country even before you actually retire?

Answer:
The last few months have certainly seen many legislative changes with quite a few amendments to various aspects regarding retirement annuities. The issue you raise is the one of emigration and retirement annuities and what has changed.

Firstly, the Income Tax Act has been amended to include a section that allows for a member who factually emigrates (the emigration being recognised by the South African Reserve Bank) to withdraw her or his benefit from the retirement annuity and terminate the membership. This can be done at any age.

Secondly, where such a retirement annuity benefit has been withdrawn on emigration, the withdrawal amount will be subject to taxation. The taxation of such a withdrawal benefit is also currently in the process of being amended in draft legislation. Currently, an amount of R1800 is likely to be tax-free with the balance of the benefit being taxed at the person’s average rate of tax which is usually slightly lower than the marginal rate at which all income is taxed. The proposed changes to this system of taxation may become effective sometime next year.

Thirdly, once the benefit has been withdrawn and taxed the after-tax amount will form part of the person’s total assets that will be considered on emigration. Be aware that on emigration a person may only take R2-million (or R4-million per family unit) abroad. There is also an allowance for exporting household and personal goods as well as motor vehicles. Finally, there is a cash allowance that may be taken. Any funds or assets in excess of these amounts will be held in what is called a blocked account. The allowances may be exceeded, but in such a case a 10 percent penalty will be payable on any excess moved abroad. All funds remaining in South Africa in the blocked account may be used in a variety of ways here through the Authorised Dealer who controls the account.

What this all means is that although you may withdraw the retirement annuity benefit, you may not necessarily be able to take the funds with you abroad — but this will depend on the total value of all your assets.

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