We are licenced both in the UK, EU and South Africa. As a fully independent firm with access to the full scope of products and the world's leading fund and asset managers, we are able to provide a wide range of offshore investment solutions for South African residence clients.
Offshore investment opportunities for the South African investor
South African investors have a number of options for investing abroad.
We’ve set out the most popular below:
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How to effectively manage your South African retirement funds
South African expats living abroad are faced with the dilemma of how to manage their South African pension, provident and retirement annuity (RA) funds. These investment vehicles are subject to Regulation 28 in South Africa, which limits the offshore investment exposure of the fund to 30% of the overall investment exposure. This creates a risk mismatch and a currency mismatch for the expat living abroad.
There are two options available to such expats:
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Why choose an offshore living annuity
Retirement annuities, pension and provident funds in South Africa are all subject to Regulation 28 which restricts the offshore investment exposure of these investment vehicles to 45%. These rules were initially created to protect investors from unregulated offshore investment schemes and ensure that future rand liabilities are matched to Rand investment income.
However, South Africa does not have any structures in place to allow the transfer of a pension offshore to an expats country of residence. South African expats find themselves holding legacy South African pensions, RAs and provident funds invested in the South African stock and bond markets and fully exposed to Rand volatility.
Expats who find themselves within a few years of retirement age might be unwilling to pay the withdrawal tax involved in financial emigration and extraction of these funds. A 20% to 30% tax charge on moving retirement funds is unlikely to be recovered in growth abroad unless the Rand falls by a similar amount. The current withdrawal tax rates are set out below:
| Taxable income (R) | Rate of tax (R) |
|---|---|
| 0 - 25 000 | 0% |
| 25 001 - 660 000 | 18% of taxable income above 25 000 |
| 660 001 - 990 000 | 114 300 + 27% of taxable income above 660 000 |
| 990 001 and above | 203 400 + 36% of taxable income above 990 000 |
Expats close to retirement age might want to consider the option of the offshore living annuity.
The offshore living annuity involves retiring the pension, provident or preservation fund into a living annuity and then transferring that living annuity to a provider able to asset swap the funds offshore. This is called a Section 27 transfer. These swapped funds are then invested into a portfolio designed by our cross-border wealth advisers specifically for the needs of the client. With the funds swapped and on an offshore investment platform we, are able to use the global fund universe to build the appropriate currency-matched and risk-matched investment solution for you.
This solution is not completely protected from changes to the foreign exchange rate and exchange control regime. A change to the excon regime could require all asset swaps to be reversed. Funds paid out as income need to be paid from the investment portfolio to the South African living annuity provider who then pays the income to your South African Rand account. In conjunction with our forex service, we are able to provide an immediate transfer of those funds abroad into your foreign bank account. The period of time the funds are in South Africa and in Rand they remain exposed to currency fluctuations.
| Taxable income (R) | Rate of tax (R) |
|---|---|
| 0 - 500 000 | 0% of taxable income |
| 500 001 - 700 000 | 18% of taxable income above 500 000 |
| 700 001 - 1 050 000 | 36 000 + 27% of taxable income above 700 000 |
| 1 050 001 and above | 130 500 + 36% of taxable income above 1 050 000 |