Pension

[Sol1]

Hi Guys,

Can anyone who ever had to deal with Pension in South Africa advise me on the following.

I have a pension fund that will be paid out to me on resignation which I may doing shortly at my South African law firm. Can someone advise me on the options to adopt with the pension fund or any companies to use.

In short, I am confused as to whether to put the money in a pension preservation fund or just bring all the money to Australia?

How does a preservation fund work anyways. Say if I needed the money can I withdraw all of it from the preservation fund.

Can I invest the money in an Aussie preservation fund or retirement annuity scheme?

Please advise me on this issue.

Thank you.

[mlothian]

Hi there Rand Rescue has assisted many South Africans with the transfer of their Retirement Funds from South Africa to Australia.

I HAVE A PRESERVATION FUND AND HAVE ALREADY TAKEN MY ONE WITHDRAWAL BEFORE RETIREMENT. IS IT TRUE THAT I CANNOT ACCESS THE REST BEFORE MY RETIREMENT AGE EVEN IF I EMIGRATE FORMALLY?

Yes, it is true. Preservation funds do not come under pension, provident or retirement annuity fund rules. It is even worse if it is a preservation pension fund. If you have had one withdrawal then at retirement age – minimum age 55 – you can only retire with one third plus a pension. There is talk of this being changed but it has not happened yet.

There is no arrangement where you South African Retirement funds can be invested directly into Australian retirement fund - Super Annuation. Once your pension fund has been paid out in South Africa it can be transferred to Australia by making use of your Annual Foreign Investment Allowance.

Also bear in mind that there is also the currency risk if you leave your money in South Africa and want to withdraw it at a later stage.

[bbop]

We used CashKows.

[monsta]

Currency prices can eat up a large part of your retirement if you don't manage them well. By my crude calculations the devaluation in the Rand over recent years could eat up over 3% of your savings each year.

So, the first thing I would think about is where is the Rand going. It was once worth more than a US dollar. So, its seen a huge decline that has gone on for over 2 decades.

The Aussie dollar is quite weak at the moment. Aussie is a mining country and the international prices of iron ore and other commodities are low at the moment. But th Aussie dollar was worth more than a US dollar +-3 years ago. So, its also seen big changes in value in recent years. But its not all one direction. It does seem to follow commodity prices.

If you feel the Rand is going to keep declining and the Aussie dollar will return to where it was 3 years ago. Then I think you have answered your question about whether to bring the money to Aussie

Edited October 25, 2015 by monsta

[Sol1]

Thanks Monsta- Good reasoning.

[BronPreston]

Yes it always a good thing to invest money else where, never keep all your eggs in one basket!

With the rand getting weaker investing offshore is very popular at the moment.

Pm if you want some more info on moving money across,

[monsta]

If it helps, I bought my pension money to Australia.

It's also been shown that picking shares involves a lot of guess work. The Aussie pension funds, e.g. Australian Super or ING Living Super give out a free pdfs showing their performance. Even a "good" fund will have terrible years and good years.

I say, go with what you know. I don't think the Rand is likely to reverse a 2 decade long trend of decline anytime soon.

Edited October 26, 2015 by monsta

[Bob]

Gordon,

if I were in your shoes, I'd have to seriously consider what the SA Rand will be worth, in terms of the Aussie $, on my retirement day.

At the mo, we're wobbling around 10 Rands (+/- a Rand) to the Aussie $.

A handful of years ago, it was worth double the current amount when transferring to Australia.

You can save on tax to the South African Taxation and watch your preserved funds depreciate over the years . . . . . tax free, of course . . . . so that they're worth a fraction to what they are nowadays, or you can bite the bullet, pay the exorbitant tax on what you can get out and repatriate the left overs to Australia.

When you begin work, you'll take out a superannuation account with a super fund, of your choice, into which you can put your South African funds into.

This will then begin to build just like every other worker's fund in a superannuation scheme in Australia.

In time, this will provide an income stream, over and above the regular Australian old Age Pension which all residents are entitled to after living in Australia for 10 years.

My advice on first starting in the Australian workforce is to do your homework and choose a super fund which has delivered a decent return over the long term.

Don't be fooled by glossy brochures and apparently high returns.

Find out what the ACTUAL return on a member's money is over the years, AFTER all fees and commissions have been paid by the fund.

It's no good having a fund which claims to have made 10% in earnings over the past 15 years, only to find out that 2% goes off in fees and another 2% is syphoned off into large commissions for those "investing" your superannuation money. At the end of the day, your actual return on your money is only growing by 6% over the 15 years . . . . . about half what a 10% interest on your funds will deliver.

This where I believe "Industry" Super Funds have performed generally better in the long term than the commercial super funds owned by the big banks and life insurance firms.

[monsta]

I agree with Bob. The only thing I would suggest is paying for a consultation with a licensed financial planner.

There might be better uses for your money than putting it into super. For example, you could use it as a deposit on a property. The savings you would realise there could be more than the interest you get from investing your pension.

But, as Bob said, checkout the tax implications of putting money into super. A superannuation is a type of pension fund with specific tax laws. You might be better off putting your money into a retirement fund that doesn't comply with the superannuation guarantee. People here only really use super funds because the law forces you too when you earn a pay cheque here.

[FingersCrossed]

Hi everyone

First time user of this forum and firstly this is a fantastic place to get awesome information. I have started my immigration process (190 Skilled nominated visa) with a respected agent to Australia last week and I am busy doing my RPL and getting documentation together. While I have been doing this, I have been spending a bit of time reading through this forum and I wanted to get an opinion please.

Currently, I contribute to 2 RA's which I started around 3 years ago and have under R 150 K collectively in them. I am concerned with the process of cancelling these policies should I move to Australia and the costs involved and I am thinking of cancelling them and placing the monthly installments in a 30 day savings account. I know that I wont be able to access the money that is saved in the RA's already until I have formally moved over and got a tax clearance certificate, however I don't know if I should continue to contribute to them if it is just going to cost me more money when I cancel them as their values will grow.

I know I should probably wait for my visa to be approved and come through - however if that doesn't happen then I could always start a new RA and contribute the money I have saved as a lump sump.

What do you guys think?

Thanks in Advance

Brad

[Erik]

Hi Sol

Here's how I did it. My provident fund was put into a preservation fund automatically after I resigned. You can do a once in a lifetime withdrawal from your pension/provident/preservation fund. If you have already done something like this before, tough luck. If you haven't you can withdraw your full provident/preservation fund in one go (which is what i did) (this does not apply to a pension fund). You get taxed for early withdrawal, but you would have been taxed at some stage, so I figured get my money out of RSA. Depositing or bringing over "pension" from RSA gets taxed in Australia, SO BE AWARE. I gifted the money from RSA to my wife in Aus since she isn't working and it didn't have too much of a tax implication in Aus. I then took some of this moeny and put it into my super and some into my wife's super (which I pay monthly). I get a tax break for the money I pay into my wife's super. I can also get a tax break on the money I put into my super, provided it is less that 10 % of my yearly salary. If you have a normal job with a regular salary, this applies, if you have your own business or work for yourself - other tax rules apply. The rest of my pension I am keeping for a deposit on a house (hopefully) at some stage.

I'm not claiming I know how to do this or that everything was completely legal, but I tried to work within the rules as far as possible.

Hope this helps.

Erik

Edited November 5, 2015 by Erik

[monsta]

Hey Erik,

Isn't there a grace period for money you bring over when you migrate here?

Also, there is a double taxation agreement between South Africa and Australia. So you can't be taxed on income that has been taxed already by RSA. I am not sure if that applies here..

[BronPreston]

This link might help you answer that question :\

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCQQFjABahUKEwjo1d7Q__jIAhXLtRQKHcnOA98&url=https%3A%2F%2Fwww.comlaw.gov.au%2FDetails%2FC2004B00549%2F3df36d05-ef92-4649-aee2-d292be14a999&usg=AFQjCNGQ6MferLu6SbkbzjQV5415jV6Kdw&sig2=X8qiOuMPcTXTcSOfZTGsVg&bvm=bv.106674449,d.d24&cad=rja

[Bob]

On 4 November 2015 at 7:36 PM, FingersCrossed said:

Hi everyone

First time user of this forum and firstly this is a fantastic place to get awesome information. I have started my immigration process (190 Skilled nominated visa) with a respected agent to Australia last week and I am busy doing my RPL and getting documentation together. While I have been doing this, I have been spending a bit of time reading through this forum and I wanted to get an opinion please.

Currently, I contribute to 2 RA's which I started around 3 years ago and have under R 150 K collectively in them. I am concerned with the process of cancelling these policies should I move to Australia and the costs involved and I am thinking of cancelling them and placing the monthly installments in a 30 day savings account. I know that I wont be able to access the money that is saved in the RA's already until I have formally moved over and got a tax clearance certificate, however I don't know if I should continue to contribute to them if it is just going to cost me more money when I cancel them as their values will grow.

I know I should probably wait for my visa to be approved and come through - however if that doesn't happen then I could always start a new RA and contribute the money I have saved as a lump sump.

What do you guys think?

Thanks in Advance

Brad

 

Brad. Doing most things prematurely before getting an Australian visa isn't the smartest way to go, usually. Personally, I'd leave all your savings, pension accounts or other financial accounts as they are. Once you've got the visa, you can then proceed to switch them into an account which allows you to get your hands on your money and bring it with you to Australia.

I have a South African mate who is now retired. Unfortunately, he took early retirement before contemplating coming out to Australia to join his three kids here.

His pension fund is frozen now in South Africa.

When he arrived five years ago, he was looking at retiring on A$40 000 a year . . . . a modest income for a retired person in Australia.

The Rand has now dropped from 7 to 11 for an Australian dollar, so his $40 a year is now more like $25. He is battling financially like a lot of other older South Africans I've come to know.

In his case, he can't access the Australian old age pension until he's live a full ten years here, so he has five more years to go with a depreciating income. It is a worry for him, I believe.

So much for leaving funds in South Africa and not repatriating them to Australia.