An important note: people who officially emigrated via the SARB only had until February 28, 2022 to buy back their ARs according to the „old FE” rules. If they have not done so, they will have to follow the new tax emigration rules from 1 March 2022 to repay them. This means that if they officially emigrated financially via SARB and left South Africa less than 3 years ago, they will also have to tax emigration and wait for the three-year period. The collection of an old-age pension in the event of emigration is governed by the old tax tables. For the 2020 assessment year, the first R25,000.00 of the amount withdrawn would be exempt from tax. After that, all amounts received above R25,000.00 will be taxed on a progressive scale starting at 18%. It should be noted that tax tables may change each year, so tax rates and consequences may differ from year to year. Previously, South African expatriates could complete the formal emigration process through the South African Reserve Bank (SARB) for immediate access to their pension. Access to your South African retirement pension after 2021 under the new tax rules The full value of your pension fund is accessible if all withdrawal conditions are met. The new proposal means that a member of a pension fund, pension protection fund, pension fund, pension fund or pension fund can make a withdrawal within a 12-month period, but this withdrawal cannot be less than R2,000.
Now, tax emigration through the South African Revenue Authority (SARS) is the only process by which you can qualify for early retirement from 2021. The amount received from receiving an old-age pension cannot be transferred directly abroad to a foreign bank account. Funds from the collection of old-age pensions must be paid into a local South African bank account in the name of the policyholder. Therefore, these funds cannot be deposited into a third party`s account, including the spouse`s bank account. Two different tax scales apply to lump-sum benefits received, one for lump sum amounts of pension, alimony, pension, pension or pension fund on leaving and the other for the withdrawal of these lump sums in the event of death, retirement or termination of employment. It should be noted that people who avoid financially may still have bank accounts in South Africa. However, with financial emigration, the status of the bank account changes to a non-resident bank account. Therefore, the funds from the receipt of an old-age pension would be paid into a policyholder`s account for emigrants/bans/non-residents. From start to finish, FinGlobal can process your pension withdrawal and securely transfer your money out of South Africa. In South Africa, RAs are subject to the Pension Funds Act, which aims to ensure that funds are properly managed and appropriate levels of risk are maintained.
The law also sets strict rules on access to funds. The basic idea behind an RA is that it provides you with a guaranteed stream of income after retirement until your death. ROs are often funded years in advance while you work. The Actuarial Society of South Africa recently estimated that a two-pot system would triple pension benefits in South Africa. Is the money paid directly into a bank account in the country where you are emigrating, or can it be paid into a local SA bank account? See also: 5 changes affecting South Africans sending Rands abroad. This is due to the fact that the National Ministry of Finance announced that it would phase out the financial emigration process of the SARB on March 1, 2021. As a result of these changes, the possibility for individuals to receive their old-age pension upon emigration would be reviewed. Since this change, to transfer pensions out of the country, South Africans must prove that they have been tax residents in another country for three consecutive years. This is called the three-year rule, which stipulates that pension fund members who migrate must wait at least three years before they can apply for their retirement pension. The reason for this rule is that SARS has the certainty that your intention to migrate is justified and permanent, and that you are not migrating just to access your retirement savings. After many years of consultation, the Department of Finance has finally released a new legislative proposal that will introduce a two-pot pension system in South Africa.
Currently, individuals can withdraw their retirement pension when they reach the age of 55 or if they migrate financially and their emigration has been approved by the South African Revenue Service (SARS) and the South African Reserve Bank (SARB). Read more: Emigrating from South Africa? Here`s Your Ultimate Guide to Tax Emigration What should you keep in mind? When applying the tax scale to the lump sum, the aggregation rule applies. This means that all lump sums from the pension fund received so far will be added up, which will catapult you into a higher tax bracket. It is this last circumstance that is relevant for those who have immigrated and want to access the funds they have saved for retirement. South Africans will be able to access one-third of their retirement savings over the course of their career, while two-thirds will not be accessible before retirement. We are a professional services firm specializing in cross-border financial and immigration advice and solutions. Our teams in the UK, South Africa and Australia can ensure that if you decide to move overseas, invest overseas or expand your business internationally, you do so with the support of experienced local experts. „These changes are intended to encourage members to maintain their retirement savings by making them more flexible to deal with unexpected pressures that members face during their work hours.” The lump sums contributing to the aggregation are as follows: Retirement pensions in South Africa are governed by the Income Tax Act No. 58 of 1962 and access to these funds is strictly regulated by law.