This is what happens to your life savings, retirement, and insurance policies when emigrating from South Africa
As more skilled South Africans look to move abroad, a growing number of people are grappling with what happens to their life savings, retirement, and insurance policies upon emigrating.
This is especially the case in light of the incoming expat tax and ‘financial emigration’, said Renier Hugo, a certified financial planner at Alexander Forbes.
“One needs to understand the consequences of emigrating to another country on one’s financial products, such as long-term insurance policies, investments and pre-retirement money,” he said.
Below Hugo outlined what happens to your main financial policies when leaving the country.
Reynier said you have the option of canceling your life cover.
“Depending on the policy of the particular insurer, you might have the right to continue with the cover depending on whether the risk has changed for the insurer,” he said.
“You should take advice on this aspect. If you can, it might be worthwhile to keep the current cover especially if you were underwritten when much younger or healthier. Your premiums will still have to be paid from a South African bank account.”
Reynier said some South African insurers currently sell life insurance that pays out in dollar or pounds; or life policies that payout in any country abroad.
Disability and Income Protection
Reynier said that South Africans should take care that must be taken when dealing with disability and income protection.
Assuming the policy can be continued, there may be certain exclusions within the terms and conditions when moving abroad, he said.
Retirement Annuities and Preservation Funds
“The usual restrictions of not being allowed to withdraw before age 55, as well as the one-third maximum cash lump sum withdrawal, with the rest to buy a pension, does not apply.
“When officially emigrating, a member of an RA may withdraw the full capital amount,” Reynier said.
“The same applies to members of pension and provident preservation funds – a full withdrawal is allowed upon emigration.”
He added that there is no restriction on withdrawal out of an employer pension or provident fund if a person decides to emigrate before normal retirement age.
Unit trusts and shares
Regardless of whether you make the financial decision to sell these, there will be a tax consequence on emigration, so it is important to take advice, Reynier said.
“With regards to living annuities, you are unable to withdraw the capital even if you have formally emigrated,” Reynier said.
“The income will continue to be paid out into a South African bank account, and from there the annuitant can choose to transfer it offshore.”