Finweek English Edition - - RIGHT OF REPLY -

Ihave the ut­most re­spect for Gregg Sned­don and the way he prac­tises his trade. I also strive to con­duct my busi­ness on a fee-only ba­sis as far as pos­si­ble, and I be­lieve that if more f inan­cial plan­ners were to op­er­ate like Sned­don does, our in­dus­try stands a chance to be far more re­spected and val­ued by the gen­eral pub­lic than what the case is cur­rently. My in­ten­tion is, there­fore, not to crit­i­cise Sned­don, but with ref­er­ence to the in­sert tit led Be­ware im­moral RA prac­tices ( 10 Oc­to­ber 2013 is­sue), I’d just like to make the fol­low­ing com­ments:

Ear­lier this year, SARS pub­lished a ref­er­ence guide on re­tire­ment an­nu­ity (RA) with­drawals as a con­se­quence of em­i­gra­tion, which took ef­fect on 13 Fe­bru­ary.

When­ever you start an RA pol­icy, you have to se­lect an in­tended re­tire­ment age at the be­gin­ning of the in­vest­ment, which will then be noted in this spe­cific RA con­tract, and thus determines the term of this pol­icy. This is re­ferred to as the ‘se­lected re­tire­ment age’ of your RA. How­ever, leg­is­la­tion dic­tates that an in­vestor is al­lowed to re­tire from their RA at the age of 55, re­gard­less of the re­tire­ment age se­lected at the be­gin­ning of the pol­icy. The se­lected re­tire­ment age can, there­fore, not pre­vent an in­vestor from start­ing to draw from their RA once they are older than 55.

In the past, SARS al­lowed any­body who em­i­grated from South Africa to ex­er­cise a sort of ‘clean break’ from SA in terms of funds in their RAs, and to trans­fer the en­tire fund value of their RAs to their new coun­try of res­i­dence in a sin­gle pay­ment. Now, how­ever, SARS has changed the rules, which pre­vents cer­tain peo­ple from do­ing this. If you are 60-years old, and you own an RA that you started be­fore age 55, and the orig­i­nal se­lected re­tire­ment age is the min­i­mum age of 55, but you kept the monthly in­vest­ments go­ing and never started mak­ing with­drawals from your RA, un­til you now de­cide to re­tire and em­i­grate to another coun­try, then you will have a prob­lem should you wish to trans­fer all your funds to your new coun­try of res­i­dence.

In the past, you would have been al­lowed to have all the funds trans­ferred over to your new coun­try of res­i­dence, but now you will, at best, be able to ‘re­tire’ from your RA, mean­ing the quick­est you’ll be able to draw your money from SA would be to take one third of your lump sum, and then in­vest the re­main­ing two thirds into a liv­ing an­nu­ity here in SA, and then se­lect to with­draw those funds at the max­i­mum al­lowed rate of 17.5% per an­num into your off­shore bank

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