Policies, Retirement Annuities

[Berndt en Marina]

Hallo

Does any-one have suggestions on how to handle the discontinuation of Retirment Annuities and Preservations funds in SA when immigrating to Australia ?

Does any-one know of a reputable trustworthy Financial/ tax advisor in Oz that one could ask these questions ?

Please let me know

Thanx

Berndt

[Mara]

When we left, albeit 13 years ago, we had no choice but to make them paid up and lodging them with our bank for safe keeping until age 55 at which time we could get them to pay out. We could have carried on paying them from overseas, but we did not see any point in that. At that time there was no way that we could transfer them to another country. Our policies were with Sanlam and Legal and General.

[Harry]

We went on paying into some of those policies that we had had a long time, but, after a while we realised that made no sense either. So we made them paid up. The policies ended up as trapped funds in SA when we finally formally emigrated on paper.

[Cindylou]

You cannot access the RA funds until you are 55, so there's not much you can do until then. Once you are 55 you can have the funds paid directly from your insurance company to your overseas bank account, provided you have EXCON approval. You will then need to show that these are the proceeds of an RA or the Aus govt will tax you at your normal rate on them.

There was another thread on this subject, http://www.saaustralia.org/index.php?showtopic=430

with much the same advice.

Cheers, Cindylou

[woodag]

I'm in a similar situation, with two RAs and an endowment insurance policy trapped in SA. They have all been paid-up for years. I saw the other thread here about RAs a while ago, and thought that since I am now over 55 that it might be time for me to try to do something about them, even though they are not really worth much. Of course, I would just like to say “how much is it worth? ok, send it.” but I guess I always knew it was not going to be that easy. Anyway, all I have achieved so far is that I managed to get a form from one of the RA companies – I'm waiting for them to explain how to fill in various things on the form.

I left SA so long ago I have completely forgotten anything I might have known about RAs, and any rules that existed when we left have probably changed several times by now.

Mara:

When we left, albeit 13 years ago, we had no choice but to make them paid up and lodging them with our bank for safe keeping until age 55 at which time we could get them to pay out.”

Sorry to be thick, but what do you mean by “pay out” - does that mean you were able to get a lump sum, or do you continue to receive monthly (say) payments? Somewhere I got the idea that only one third of a RA could be taken as a lump sum. However from the form that I was sent I get the impression that if the total value is less than R22500 (as for one of mine) that it might get treated differently. I also saw something that said that if a RA was started less than 5 years before you left SA (this is the case for both of mine) no capital can be transferred – does that mean that I can't get a lump sum anyway? If I have to take it as periodic payments, can I select the term? (Instead of a “lifetime” annuity - I would like to see the thing over and done with as soon as possible. Or does this depend on the particular RA?).

Cindylou:

Once you are 55 you can have the funds paid directly from your insurance company to your overseas bank account, provided you have EXCON approval. You will then need to show that these are the proceeds of an RA or the Aus govt will tax you at your normal rate on them.

That is sounding better than I expected, I thought payments would have to go to the bank in SA.

So the Aussie tax man treats it like a superannuation payment or what? No tax if you are over 60 from next year? That would be good, but I'm more concerned that I might have to become a taxpayer in SA again and submit a tax return to them. I have not paid tax in SA for over a quarter of a century and keeping it that way would be good (not so much paying the tax, more the hassle of it).

Thanks in advance for any comments.

Regards,

Andy

[Mara]

Hi Woodag

All I can tell you is that we applied to have our RA's pay out at the end of last year. We were allowed to access a third and the balance has to pay out monthly as a pension. We had to open SA bank accounts, two separate ones, for my husband and I, so that they could pay into that. The banks apparently do not allow joint accounts any longer. The insurance will only pay into a bank account that is in your name, having signing power on a bank account is not the same as having the account in your name. And yes, in our instance we had to have tax office files, as it had to be referred to the tax office before they would pay us. If it wasn't for my sister fighting with them on our behalf, we would probably still be battling. It took us approximately eleven months, with her assistance, to get it sorted out from start to finish. We had our policies for around 20 years, so I am not sure about the less than five year rule. They were worth more than the $22500, so sorry, I cannot help you there either.

Good luck!

[Cindylou]

Cindylou:

That is sounding better than I expected, I thought payments would have to go to the bank in SA.

So the Aussie tax man treats it like a superannuation payment or what? No tax if you are over 60 from next year? That would be good, but I'm more concerned that I might have to become a taxpayer in SA again and submit a tax return to them. I have not paid tax in SA for over a quarter of a century and keeping it that way would be good (not so much paying the tax, more the hassle of it).

Thanks in advance for any comments.

Regards,

Andy

Hi Andy

You do not need to have the funds paid to an SA bank account - if your insurance company tells you that you do they are talking through their ears! As a non resident you do not have to pay tax in SA on the payments (SA recently moved to "residence based" taxation) and you can elect to have quarterly, biannual or annual payments. BUT you need to have SARB approval for the insurance company to make these payments to you, so if your SARS affairs weren't sorted out before you left now's the time to bite the bullet and do it. The Aussie tax man will treat the payments in the same way as your super on condition you can prove that the payments are the proceeds of genuine pension savings.

Cheers, Cindylou

[woodag]

Thanks to Mara and Cindylou.

You do not need to have the funds paid to an SA bank account - if your insurance company tells you that you do they are talking through their ears!

The insurance company has not told me that - I have asked them a lot of questions, but so far they have told me hardly anything. However, Mara said she had to have a SA bank account so it looks like some companies will tell you that. At least I know enough now to try to argue with them if they say I need a SA account.

As a non resident you do not have to pay tax in SA on the payments (SA recently moved to "residence based" taxation) and you can elect to have quarterly, biannual or annual payments.

Thanks, that it good to hear. When I started to look at this, I did find info about some change to “residence based taxation”, but somehow I got the idea that it did not apply to income earned/generated in SA. I only started to think about all this when I found the form that was sent to me demands that I provide a tax reference number and some other things that it looked like I would be hard pressed to come up with.

Regards,

Andy.

[Harry]

I suggest you folks read THIS post, as well as the entire thread it is part of. The very first post on that thread has a set of links which I suggest you read....in detail. It is a slog, but do it.

[Riekie]

Ek het hierdie inligting gekry by Andro Griessel - 'n Finansiële Adviseur in Suid Afrika. Hy het gesê ek mag dit maar op die forum plaas en ook sy kontakbesonderhede as iemand nog inligting soek.

Hier is dit in kort:

Uittree-Annuïteite:

Mense wat bygedra het tot normale uittree-annuïteite het ongelukkig baie min opsies. Die geld is geensins beskikbaar voor ouderdom 55 nie. Hulle kan uit die aard van die saak ook nie aftree uit die fonds voor 55 en 'n inkomste begin verdien nie. Indien hulle die ouderdom van 55 bereik kan hulle ook net 1/3de in kontant neem waarvan die kleinste van die 1/3de of R120 000 belastingvry sal wees. (Daar is nog 'n ander formule om die belastingvrye gedeelte te bepaal, maar vir eenvoudigheidsdoeleindes kan mense aanvaar dit is maks R120 000…die ander formule kom selde op 'n ander antwoord uit). Die oorblywende 2/3des moet 'n pensioen in SA aankoop wat in 'n SA rekening moet uitbetaal. Ek is nie seker of van die mpy'e al in oorsese bankrekenings inbetaal nie….ek twyfel amper.

Pensioenfondse & Voorsorgfondse:

Mense wat aan pensioenfondse of voorsorgfondse behoort het by hulle werk (in SA) moes een van 'n paar opsies uitoefen toe hulle die werk verlaat het. Hulle kon of die geld laat uitbetaal (nadat belasting verhaal is) of hulle kon dit oordra na 'n pensioenbewaringsfonds of 'n voorsorgbewaringsfonds of 'n Uittree-annuïteit (UA). Weereens, vir die mense wat die UA roete gevolg het is daar nie veel opsies nie. Sien hier bo. Die mense wat egter hulle fondse oorgedra het na die bewaringsfondse het dalk opsies. Die bewaringsfondse se reels laat toe dat jy 1 onttrekking mag maak uit die fonds voor normale aftreedatum. Hulle is egter nie voorskriftelik oor die bedrag wat onttrek mag word nie. Jy kan dus teoreties die hele bedrag onttrek. Onthou egter net dat belasting verhaal sal word (daar is slegs 'n baie klein belasting vrystelling). Baie mense het egter reeds 1 onttrekking gemaak met die oordrag en die opsie is dan nie meer beskikbaar nie. Indien hulle egter die volle bedrae oorbetaal het KAN hulle AL hulle geld nou onttrek (na belasting).

Hy sê hy gee nie om as iemand hom kontak vir raad of om uit te vind of hulle wel 'n opsie het om hulle geld uit 'n fonds te onttrek nie nie, maar indien dit uitgebreide navrae is sal hy 'n fooi van R500 moet vra om sy onkostes te dek t.o.v. telefoonkostes ens. (Bg inligting is gratis aan my verskaf - dankie Andro!!)

Hy is:

Andró Griessel (B Com; MIFM)

Stofberg & Griessel Finansiële Dienste (FSP 5966)

T: 023 347 1442

F: 023 347 1463

S: 082 822 3906

Email: Andró Griessel

Hoop dit help......

[Andro]

Hello julle,

Nog een of twee goed wat dalk kan help.

1) Dit is so dat as die totale waarde van jou UA minder is as R22500 kan jy dit as 'n lump sum onttrek. So indien dit die geval is...doen dit.

2) Die maksimum toelaatbare onttrekking is steeds 20% terwyl die minimum 5% is. Daar is egter sprake dat hierdie maksimums verminder gaan word. Omdat ons beweeg het na 'n residency based tax basis behoort dit dus nie 'n probleem te wees as jy die maksimum toelaatbare bedrag nl 20% onttrek en dit dan van hier af terug vat nie. Jy kan selfs iets soos 'n maandelikse belegging by Allan Gray oorweeg wat jy dan een of ander tyd as 'n groter lump sum kan oorvat Oz toe. Ek persoonlik sou maar so gou as moontlik my geld uit die kloue van die versekeraars wou kry!

hoop dit help.

email my gerus by andro@sgmakelaars.co.za as daar nog vrae is of as ek dalk kan help.

Groete

Andro

[ottg]

Most advice delivered on this thread is correct however the advice depends if you emigrate or if you are resident "permanently" in Aus. The rules also differ for endowment policies, RA and Pension funds. I have been through this process myself. If the interest in the forum is large enough I will be able to provide a one-on-one facilitation for the Perth area. Please register your interest directly with me!

Make endowment policies paid up. This is a bad investment which cannot grow because of the life cover it provides (see RAs below). The life cover cost dilutes the investment power. If life cover is required rather get a pure life insurance policy and once settled in Aus cancel it, after obtaining your new life cover in Aus.

As was stated elsewhere you cannot have access to your RAs or Pension fund before your retirement age of 55. A special application can be made to the Board of Trustees but the fund rules will override. This situation is not so bad because as far as I know, no where in the world have pension funds ever be seized by a Government. The argument is that RAs and Pension funds were tax deductible and therefore are taxable if taken before retirement. Now what to do with your RAs and Pension funds before retirement date. HERE is the trick - manage it yourself and grow it but don't feed it.

RAs:They consist of two portions a. Insurance b. investment portion. Now, if you have wondered why your RAs have performed so badly based on the monies invested. Well this is because of the high cost of the life insurance portion. CHANGE your RA to a pure investment vehicle. If you are with Sanlam go for a Stratus type policy and select from various fund managers (Coronation, Allen Gray etc) a portfolio that suites the investment markets at that time. Continuously monitor the RSA market and switch to a different asset when needed. This requires that you follow the RSA economy and be aware of the different assets available. While the management fees are slightly higher your net growth will be higher as well. You don't need a degree to be able to do this, I can show you how! All markets are cyclic and therefore your investment must not remain static.

Pensionfunds: Make sure that you are not "locked" into the pension fund of your last employer. Ensure that you place your Pension into Preservation fund (advantages mentioned elsewhere) and ensure that the new fund rules allows for the transfer of your funds to any other approved fund administrator that complies to the Prudential Guidelines as stated by the Financial Services Board. The new fund administrator also has various options available from where you can select fund managers as for RAs above. Choose a administrator with low management fees is important and select reputable fund managers based on performance.

Pensionfund: Self management: This is the ultimate where you select a fund administrator and an asset manager which is also an on-line broker. Once this non-discretionary account is setup you can buy and sell the underlying assets directly on the JSE self. Note you may never withdraw the money. This way you can even outperform the ALSI. Yes, there are still management fees applicable (even if you do the work yourself) plus brokerage and Strata fees per transaction. But because your pension fund is a long term investment there will be few transactions (2-10 per year) and overall you will outperform most funds because you will make the profits/losses directly. This requires that you follow the RSA economy and are aware of the different equities, bonds, guilts and property stock available. While the management fees are slightly higher your net growth will be maximized. You don't need a degree to be able to do this, I can show you how!

At Retirement:Besides all the deductions possible at retirement (stated elsewhere) you have to purchase an annuity with the remainder 2/3 of the funds. HERE is the trick - some administrators fund rules allow a self managed annuity. Now it is possible to grow your Annuity WHILE you are receiving a pension. This is based on the process described above for self management. This part I haven't done yet but if the interest in the forum (one-on-one) is large enough I will look into this. Note that the portion that you are allowed to take in cash is taxable at the average of the prior two year's rates. My question is because you are not a RSA resident at what rate will this be??

As an illustration if you have R100k in an employer's pension fund it may grow at inflation + 2%. Over 10 years it may be worth R162k. If you do self management the growth of ALSI + 4% is easy achievable. Over 10 years it may be worth R730k.

There are small variants on the above and I may be able to assist you! Note that this process is very administrative intensive but it can be done!

[woodag]

As mentioned further back in this thread, I also had some RA policies trapped in SA, and being over 55 years of age, I started working on trying to get something out of them.

It has taken 168 email messages, many phone calls, faxes and letters, over a period of 18 months, but this week I finally managed to get my hands on some of the proceeds.

Could it have been done in less time? Well, if being a "squeaky wheel" comes naturally to you, and you have the time to be continually chasing things up, then perhaps you could get through it in a third of the time it took me.

During this exercise I was frequently reminded of what Harry, of SACanada fame, had to say about people who work for banks in SA - that they hate us and enjoy nothing more than causing us misery ( http://www.saaustralia.org/index.php?showt...5635entry5635 ). I discovered that people who work for insurance companies in SA are similar to the bankers and conspire with them to make things difficult. At least that is the way it seemed at times.

There is probably little that could have been done to speed up some of the things that needed to be done. An application to the Reserve Bank takes as long as it takes (six weeks in my case). But silly, unexpected things are the real problem. For example, how long does it take to open a bank account in SA? At one point somebody at the bank told me that it would take about half an hour. He was overrating their efficiency just a little, because it actually took about five months to do it. Following that there was a six week standoff with one of the insurance companies demanding that I provide them with "proof" of my bank account, while the bank steadfastly refused to provide such proof.

That I find any of the above worthy of comment is perhaps just a sign that I have been away from SA for a long time and have just forgotten how things are done there. Business as usual for them I guess...

[Mara]

Hi Woodag

Good news! I have just one question for you, you say it took five months to open a bank account in SA, I guess from this they also insisted with you that they pay into a SA bank account?

I am just interested!

[woodag]

. . . you say it took five months to open a bank account in SA, I guess from this they also insisted with you that they pay into a SA bank account?

Mara,

Yes, they insisted that it had to be paid into an account in SA. And, not only that, the existing account that had been created when my wife and I left SA was not acceptable either, because although we left as a family unit, that account is actually in my wife's name (way back the bank told us that a joint account was not possible). So now, the bank was saying that the proceeds should be paid into the existing account, but the insurance companies did not want to do that - that was part of the delay in getting an account opened.

From what I have seen here, at least some insurance companies will pay directly into an overseas account. One of the companies I was dealing with, Old Mutual, told me that they could or would not do that because they do not have a way to do currency conversions themselves. They said that in the past they used to get around that by getting some third party to do the conversion but they stopped doing that because it was costing some huge amount for each payment.

One of the funny things was that while I was in the middle of trying to get the bank to open a new account in my name, I sent a note to the guy at Old Mutual, just to let him know that I had not died, and I was still waiting for the bank. He replied something like "Oh! Why don't we just pay you directly to your account in Australia?". This, after it was him who had told me in the first place that they would only pay to an account in SA. Of course, I jumped at the opportunity that he seemed to be offering, but after few weeks it was back to "No, sorry, we can only pay to an account in your name, in SA".

[Harry]

Hmm...I have not been here in a while, but I see the issue is still going strong.

Here's the way I see it:

If you have "financially emigrated", the SA Reserve Bank requires an accredited financial institution in SA to act as custodian over all your financial assets and instruments in SA. The amounts of money and the "types"of money that may be repatriated to you outside the country is supposed to be vetted by them as "agent of the Reserve Bank" in line with the Reserve Bank rules. They cannot do that if they do not have visibility and control of that money. The way for them to get that visibility and control, is to have your money paid into a bank account (usually with them).

That is why I always thought that it was obvious that one had to get it paid into an account at an SA bank. A regular human being, not living with the Reserve Bank limitations every day, would find it insane. When you realise they are trying to control what you take out of the country, the rule becomes obvious. I think that is why some tell you that there is no problem in paying you out in Oz and then retract it later when they have done their homework.

That having been said, I am aware of at least one person who is getting a monthly pension from a state body in SA and who receives it directly and NOT via an account in SA...at least as far a I know. However, it is a clear-cut case of an INCOME with no capital attached. It is therefore obvious that it should be paid out to the person over here and requires no vetting.

[Mara]

Hi Woodag

I know the feeling. Fortunately for me I have a sister in SA who deals with exactly this kind of thing on a daily basis and has done so for the last 20 years. She looks after the blocked funds for the rich folks that have left the country. She tried everything, but in the end we had no choice, SA bank accounts had to be opened. Our policies were with Sanlam and Legal and General. She has signing power on both accounts, so when I need the money she arranges to transfer it. So far we have just left it in the account for their use.

[Harry]

I've checked with that party receiving a monthly pension, whom I refer to above, and they DO USE AN SA account. They also confirm there was no other way to work it.

SO, take it as read that you need an account in SA and don't waste time figuring out other schemes.

[woodag]

. . .

SO, take it as read that you need an account in SA and don't waste time figuring out other schemes.

I wouldn't say that I spent a huge amount of time trying to work out how to get paid directly.

The biggest delays for me were due to:

1) I had trouble just contacting one of the insurance companies. I knew that the company had been taken over by a second company some years after we left SA. They did not bother to let me know at the time, but I had managed to track down the second company about eight years ago. What I did not know was that the second company had in turn been taken over by a third company - again, without telling me.

2) Getting the bank in SA to open a suitable account for me was a nightmare. E-mail messages to them were not responded to. Letters to them went missing, or so they claimed. Phoning them did not achieve much either. The person I needed to talk to (and there were many of them) was seldom there, and never once called back when I left a message. Even when I did manage to talk to them they either didn't know what I was talking about, or if by some strange chance they did know what I was talking about then they didn't have any authority to do anything to help anyway.

3) Getting the bank in SA to transfer the funds to me here was just as bad, for pretty much the same reasons as given above.