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Pension fund transfer vs. withdrawal


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#1 Ericadslv

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Posted 21 February 2014 - 12:10 AM

I need some advice please. We are in the final stages and will soon have our visas, hence need to make some critical decisions. I have built up quite a nice pension fund and if i resign and withdraw will have to pay SARS quite a substantial amount in tax. Does anybody have any idea if i can transfer this into a fund in Australia and if i do so, would i get a tax benefit?



#2 Classicman

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Posted 21 February 2014 - 12:31 AM

My understanding is that you can't.  You either have to leave it here in a preservation / pension fund, or cash it in, pay your tax and reinvest in Australia.

 

Bummer, I know, I'm in the same boat.



#3 Ericadslv

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Posted 21 February 2014 - 12:41 AM

I'd rather take my chances in Australia then. Either way I'll eventually have to pay the taxes and with the direction the Rand is heading, it would probably be better to cut my losses while I can.


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#4 Jacovl

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Posted 21 February 2014 - 12:19 PM

Suggest you make contact with Hugo from Cashkows. He will certainly give you sound advice wrt your personal situation. Contact him at hugo@cashkows.com
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#5 Ericadslv

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Posted 21 February 2014 - 04:30 PM

Great - thanks a lot for that. I will definitley make contact with him.



#6 Classicman

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Posted 21 February 2014 - 11:22 PM

Has anyone investigated the option of a Pension fund elsewhere in the world that may have links to South Africa and Australia?  The thought would be to transfer to Australia via another country.


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#7 Deon

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Posted 22 February 2014 - 02:37 AM

Classicman,

 

In May 2012 I have done my Thesis for my Master of Taxation degree on this subject by comparing the UK Pension System with the Australian Superannuation System including the requirements to transfer funds to an Australian fund on immigration. The  RSA Pension System is similar to the UK Pension System..

 

The Superannuation Industry (Supervision) Act 1993 (SISA) does not have a provision that allow the transfer from any foreign fund. The only way to get funds from a foreign pension fund into an Australian superannuation fund is to fulfill the withdraw requirements from the foreign fund and then to pay it as a non-concessional contribution to the Australian superannuation fund. This transfer payment will be limit to the non-concessional contributions cap limit which is currently $450,000.

 

If you have funds in a Australian Superannuation Fund and you emigrate to another country, the only way to withdraw funds from your Australian fund is to meet a 'condition of release'. If you are under age 55 years, the only way is to renounce your Australian Citizenship or Permanent residency status to prevent you from ever to return to Australia.

 

To conclude, I have kept it simple and to the basic. In reality it is much more complicated to fulfill all the many requirements and there is no need to over complicate this discussion with all that detail.


Edited by Deon, 22 February 2014 - 02:41 AM.

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#8 Classicman

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Posted 22 February 2014 - 04:23 PM

Thanks Deon, that was quite a comprehensive answer.

One other question if you don't mind.

Is there an offshore fund somewhere (maybe US$based) that one could look at. If there is any way possible of transferring the funds somewhere without having to pay tax upfront, this must be worth investigating.

Thanks again for sharing your knowledge.

#9 Bob

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Posted 22 February 2014 - 08:59 PM

 

Pete has become a mate of mine over the past 4 years.

 

When he left South Africa, he intended to retire on A$40 000 a year to live in Australia.

 

He left most (67%) of his pension fund in South Africa, afraid of taking it out and paying a lot of South African tax on the amount.

 

The same pension fund amount, instead of returning Pete A$40 000, now only pays A$25 000 a year and is losing more and more each year, with the Rand losing against the Australian dollar.

 

In five years time, he may only get A$18 000 or A$20 000 a year to live off . . . . . a far cry from A$40 000 he intended to get.

 

The moral of the story?

 

Pete would have been better off, in hindsight, to bite the bullet, withdraw all his pension fund, pay the South African tax and then put the remainder into an Australian pension fund.

 

He might only have started off getting A$25 000 a year, but he would be able to budget with some safety on what he would get in five years time.


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#10 Micah210

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Posted 23 February 2014 - 01:39 AM

There are also talk of new legislation that will force members of RSA pension and provident funds to invest a minimum of 25% of their contributions into parastatals like Eskom, SAA etc. And legislative changes effective 1/3/2015 will prevent provident fund members from taking a 100% in cash at retirement. No thanks, I would rather take pay the tax and take my money!

#11 Ericadslv

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Posted 24 February 2014 - 05:59 PM

Thank you so much everybody for all the advice. Bob/ Micah - you've just convinced me. I will pay the tax and take all my money. See you all on the other side :ilikeit:



#12 Ericadslv

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Posted 25 February 2014 - 10:11 PM

Any thoughts on whether I should retain my life policies in SA? What death/ disability benefits are provided for in Oz?



#13 Bob

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Posted 26 February 2014 - 07:43 PM

 

Every worker in Australia has 9% of their gross wages / salary placed into a superannuation fund by their employer every quarter (i.e. every three months)

 

If you work for somebody and have a boss, you will have super.

 

You have the right, since 2005, to nominate any super fund you choose and I always recommend an "Industry" super fund, set up by your trade union or professional association.

 

http://industrysuper.com.au

 

Their returns over the long term (10 years +) are consistently higher for their members than what commercial super funds return for their clients.

 

If you have super, then  you'll find the super fund will have life insurance available for you at  very competitive rates, because the super fund can get "bulk" life insurance rates for all of its members.

 

I am now retired, after having worked for the Australian gov't for a long time, but I still work seasonally carting water in the summertime. My boss puts 9.25% of my gross earnings into Australian Super, a super fund I chose to have my super going into for me.

 

The life insurance rates for Australian Super are here, but any "Industry" super fund has similar rates for its members.

 

http://www.google.co....61965928,d.dGI

 

If these rates are better than what your life insurance premiums offer in South Africa, then close the life insurance down, get whatever you can from them and bring the funds to Australia to invest.



#14 Deon

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Posted 04 March 2014 - 11:48 PM

Classicman

 

I may be under correction but I think that the South African Tax Law won't allow you to withdraw any funds from your annuity fund without paying tax thereon. Therefor I don't think there is another solution for this problem except for biting the bullet.

 

I have to agree with all the previous commentators above. Personally, I think this chart  speaks for itself... In April 2009 R1,000,000 would be worth $158,730 at 6.2. In February 2013 that same R1,000,000 would be worth $100,502 at 9.95. Thus, in ±4 years that R1,000,000 is worth ±36.68%. Just imagine what the effect is on your net worth!!!

 

Attached File  AUSZAR.pdf   550.2KB   5 downloads


Edited by Deon, 04 March 2014 - 11:50 PM.

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#15 Bronwyn&Co

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Posted 05 March 2014 - 01:33 AM

Any thoughts on whether I should retain my life policies in SA? What death/ disability benefits are provided for in Oz?

Erica I would keep them for a few months until you can get new life cover in Australia. Then just cancel in writing & stop the debit order.

We found cover cheaper in Australia.

You can get some quotes on www.iSelect.com.au

Edited by Bronwyn&Co, 05 March 2014 - 01:34 AM.





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