Question:
We lived in S.A. from 1983 to 2004 I have an Investec Preservation Pension Plan with a retirement date of 24 August 2028 R432 459. Also my husband has a Galaxy Preservation Provident Fund R600 000 with a retirement date of 30 April 2008. There is also a Retirement Annuity Fund R61 429 can claim at any time. Can we get the full pension amounts paid out now and how much tax would we pay? Or could we transfer to the UK ? Also how much tax would I pay on the retirement annuity and can I also take out the full amount. Any advice would be appreciated.
Answer:
Vivienne, You are allowed one - full or partial - withdrawal from each of your preservation funds. If you have not accessed your preservation funds before, you can simply withdraw. The net (after tax) amount will be paid out to you. These amounts will be taxed per the withdrawal lump sum tax table (in aggregate, not individually): the first R25 000 is not taxed, the balance to R660 000 is taxed at 18%, the balance to R990 000 at 27% and the remainder at 36%. As stated, this table is applied to the aggregate of your retirement fund withdrawals, i.e. you only receive the tax-free amount of R25 000 once.
If you have previously withdrawn from your SA retirement funds (perhaps you did not preserve all your retirement fund benefits when you left) then this will be considered by SARS. If you are over 55, you can also access your retirement annuity. As the amount is below R75 000 you can claim the full amount as a lump sum. This will be taxed per the retirement lump sum tax table. The retirement lump sum tax table provides as follows: the first R500 000 is not taxed, the balance to R700 000 is taxed at 18%, the balance to R1 050 000 at 27% and any amounts above that at 36%. However, this table is also applied taking into account any previous retirement fund withdrawals.
Assuming the retirement annuity is in your name and no previous retirement fund withdrawals: if you first draw your preservation fund (total value R432 459), you would still have a tax-free allowance of R67 541, ie the entire retirement annuity would be tax-free. The tax on the preservation fund would be R73 343. If you draw the retirement annuity first, there would be no tax on the retirement annuity, but the tax on the preservation fund would be R77 843. So you would claim the preservation fund first. Assuming the retirement annuity is in your husband's name, the retirement annuity would be tax free if drawn first, and the preservation fund would attract tax of R108 129. If the preservation fund was drawn first, it would attract tax of R103 500 and the retirement annuity then R11 057 (sum - R114 557). So he would draw the retirement annuity first. The net amounts must be paid into a SA bank account. If you don't have one, you will have to open a non-resident bank account. From, there you can transfer the money to the UK.
If you have accessed your preservation fund(s) before, you can only access them again from the age of 55. You must then retire from these funds, if you plan to take the cash. In a provident preservation fund, you can take the whole amount as cash (net of tax). In a pension preservation fund, you must then use two-thirds to buy an annuity. As you will not want that, you would have to do the following:
- transfer the preservation funds(s) to an retirement annuity
- go through the formal financial emigration process with SARS (as total retirement annuity value is now above R75 000 this is the only way to claim the retirement annuity as a lump sum)
- withdraw from the retirement annuity, paying tax per the withdrawal lump sum tax table.
