Emigrate with pension savings?

TO PROTECT AGAINST RAND DEVALUATION Essential question to ask is, will your move overseas be permanent?

AMoneyweb asks: I’m 32, use a 10X pension umbrella fund and since 2015 have accumulated a R1.2 million investment. I’m planning to financially emigrate by end 2019. Would it be best to resign, cash out the pension and move it overseas as part of the annual R1 million discretionary allowance?

Based on the tax table, I’d take a R300 000-odd tax knock and be able to move R900 000 overseas (France). My thinking is that over the next two years the rand could devalue and moving my money overseas will protect against forex fluctuations. reader

If your emigration might only be temporary, it might be in your best interest to move your pension fund into a preservation fund, which basically preserves your investment without tax implications. You’ll still be allowed to make a once-off withdrawal up to the total value at any time. The pension fund, as it stands, will be fixed until 55 but it provides a lot more flexibility.

You also continue receiving the benefit of tax-free growth within the preservation fund structure, so it might not be a bad idea to hold on to your pension fund for a year or two, as it provides you with some time until you understand the direction you’ll be heading in.

Should you formally emigrate, you’ll be required to open a non-resident bank account and ensure your tax affairs are in order before you can receive your capital (if your pension fund has been transferred to a preservation fund). If you withdraw fully prior to emigration, this process will be much quicker, with less hassle and is probably the best option in terms of efficiency.

If your emigration will be permanent, it makes sense to withdraw now and take the capital with you to France. Here is how the tax is calculated: R1 200 000 – R25 000 (the taxfree portion) = R1 175 000 As R1 175 000 falls in the highest table, you’d then add R203 400 + 36% of the amount above R990 000 (R1 175 000 – R990 000 = R185 000). R203 400 + [36% x (R185 000)] = R270 000 tax payable. So R930 000 will be available after tax. Note: this won’t apply to everyone, including individuals who have taken withdrawals before.