Jump to content

Pension fund transfer vs. withdrawal


Ericadslv

Recommended Posts

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?

Link to comment
Share on other sites

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.

Link to comment
Share on other sites

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.

  • Like 2
Link to comment
Share on other sites

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

  • Like 1
Link to comment
Share on other sites

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

Link to comment
Share on other sites

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.

  • Like 1
Link to comment
Share on other sites

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
  • Like 1
Link to comment
Share on other sites

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.

Link to comment
Share on other sites

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.

  • Like 1
Link to comment
Share on other sites

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!

Link to comment
Share on other sites

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:

Link to comment
Share on other sites

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

Link to comment
Share on other sites

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.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CFgQFjAB&url=http%3A%2F%2Fwww.australiansuper.com%2Flayouts%2FDownload.aspx%3FID%3D64a76fc5-9f31-4598-bae7-c074286d645b&ei=mbYNU4XgOc2CkgXjt4DwDw&usg=AFQjCNEHBvE9ypP8r-AFOmXUSQL610HLYg&sig2=uE2Xv0O-wfkyJ4k2IjNhFA&bvm=bv.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.

Link to comment
Share on other sites

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!!!

AUSZAR.pdf

Edited by Deon
  • Like 1
Link to comment
Share on other sites

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
Link to comment
Share on other sites

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.

We have opened an off-shore account via Std Bank in Isle of Man (AU$). We have been putting money in whenever the exchange rates does not look to bad. This forms part of your R1m per year that you can take out. Once we are in Aus, we can use the debit card to pay out of that account, no exchange fee as the money is already in AU$

  • Like 1
Link to comment
Share on other sites

How do we go about opening an off shore account? Can I do this via Internet banking or would I have to go into the bank?

Link to comment
Share on other sites

How do we go about opening an off shore account? Can I do this via Internet banking or would I have to go into the bank?

We did ours online via ANZ I think. You can start making deposits, but you can only 'activate' the account when you go into the bank with your passport and other ID. Note that the interest you earn will have 50% withheld for tax , until you give the bank your Australian Tax File Number (TFN). They do refund it once you hand in the TFN.

I'm not a financial advisor, you should confirm this info, it's just my experience.

Edited to add: If you decide to use Exchange for free, Tanya vd Westhuizen will open an offshore account for you and trf your money. Quite a few of us have used their services.

Edited by Bronwyn&Co
Link to comment
Share on other sites

I am talking about anoff shore account from RSA and not an Aus bank account that you open so long while still in SA. Think there's a slight difference. You can withdraw the money in the offshore account wherever you are.

We did it via a broker . He gave us all the firms to fill in and then you get three months for you to do your first deposit . That needs to be done at forex department at the bank. We gave our broker a mandate to transfer funds from our nirmal account to the off shore. As soon as the rate is good he calls me up and says its time to transfer. We tell him how much and off he goes. He does this for a few people si he can even negotiate a better exchange rate at the bank since he does such a large transfer for everybody. I have done the transfer myself but it was with fnb and took forever in the bank. Will let the broker do it next time.

Let me know if you want hes details:)

Link to comment
Share on other sites

Ahhh ok so we are talking about 2 different things here. Renny if I may ask then, are you referring to an offshore accout in a different country (not Australia)? Or is it just a different process to get your money to Australia? Sorry, I don't have any experience with this.

Edited by Bronwyn&Co
Link to comment
Share on other sites

The Isle of Man is most certainly not Australia, in fact it's about as far away as you can get from Australia.

The Isle of Man is a banking hubb and you will be able to open an account in almost any currency you want, USD, GBP, EUro, Swiss Francs and AUD.

The Isle of Man banks are governed by Isle of Man law, not Australian. They have different requirements for proving existence to Australia.

There are a couple of issues though. The interest rate they offer will typically be slightly lower than the rates offered in the domestic markets. Also the double tax agreements Australia has with the UK and the Isle of Man places very high reporting requirements on the banks and as a result most, if not all, will not provide a service to Australian tax residents.

Link to comment
Share on other sites

We have opened an off-shore account via Std Bank in Isle of Man (AU$). We have been putting money in whenever the exchange rates does not look to bad. This forms part of your R1m per year that you can take out. Once we are in Aus, we can use the debit card to pay out of that account, no exchange fee as the money is already in AU$

Ummm I know what the Isle of Man is and that it's not in Australia!

Renny's post reads as if he used the Isle of Man branch of Std Bank to open an account in Aus. Now I see he actually typed Au$ and not Aus. I usually use AUD as the abbreviation myself.

I'm not too sure why you he is bothering to pay double commission to move the money twice, that's all ;). You can just as well move it straight to Australia and use your debit card once you are in Aus, as the money will also already be in AUD.

Edited by Bronwyn&Co
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

×
×
  • Create New...