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