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If You Immigrate Before Your Annuity Matures

• The full fund value can be paid out if someone immigrates before the retirement annuity matures.
• This is usually at the age of 55.
• This could also be before the age of 55, all depending what the retirement annuity stipulates.
• If no tax benefits have been received the first R22 500 is tax-free; this is only in the instance where no retirement benefits have been received.
• The SARS Tax table will assist in spelling out the rules and regulations pertaining to the withdrawal of retirement annuities.
• The amount after tax which has been taken off forms part and parcel of the amount allowed in your foreign capital allowance, when you immigrate.
• Should the member not draw from the annuity before the maturity date, then a third of the fund’s cash value in cash at retirement age of 55 can be drawn, but is taxable.
• If retirement benefits have never been received by the member at retirement age, then retirement benefits for the first R315 000 will be tax-free.
• And if the balance is invested this will be taxed as per any monthly taxable income.
• If the retirement annuity was taken out only five years before immigrating, then the total taxed income can be paid out to the member in his or her new country.
• If the annuity was taken out less than five years prior to immigration, then only a portion of this can be paid out to the member.
• Every circumstance differs.
• One retirement annuity could easily differ from another.

Should you need to find out more about immigration and your retirement annuity visit the SARS website at www.gov.za to further your knowledge.

Can you retire in Comfort?

There are claims that only 6 out of 100 South Africans will retire been financially secure. This means that the majority of South Africans do not and will not have sufficient funds to retire.

The most recent statistics explain why.

1. Longevity. Due to modern factors, you are likely to live longer than your ancestors, meaning more potential years spent in retirement.

2. Pension/Provident fund gap. Very few, if any, employer sponsored pension savings schemes, will pay you benefits that equal your last salary cheque. You will see a drop in your pensionable income by at least one third. Also not included in your pensionable income will be any allowances such as vehicle and housing subsidies.

 
3. Changing of employment. Many individuals, when changing jobs, cash out any funds saved in a pension/provident fund to buy luxuries or to settle debt.

4. A late start in saving for retirement. Self – employed people many times leave saving for retirement until much later in life. This choice is made because they first want to establish their businesses. This delay results in insufficient capital being accumulated to enjoy a comfortable retirement.

5. Poor planning. The majority of people don’t realise the importance of having a financial retirement plan. One which has to be continually revised and updated according to their circumstances and state of affordability.

 
The above reasons are to mention but a few of the many factors responsible for retiring with insufficient funds. There are ways and means to avoid retiring poorly.

These include:

Saving and investing wisely as many years as possible to pre-retirement.

Choosing the correct investment vehicle for all pension/provident fund payouts at immediate pre-retirement.

  
At and during retirement, to continually monitor and if necessary, change your investment options. Always be on the lookout for better returns of interest on your funds invested.

These are very basic guidelines. But if you apply them, you should be able to retire without any major financial issues.

Your pension is going to be taxed differently as from the year 2012. Money contributions towards either your pension fund or retirement annuity from your place of employment is not taxed at present, but this is about to change.

When the budget speech was made this year in March, all pension funds as well as retirement annuity contributions made by your company will change from next year as SARS considers this expense to be fringe benefits and therefore will be subjected to being taxed.

This all depends, naturally, on what type of annuity you currently are on. The amount you are presently permitted to deduct, should you belong to a pension fund, is a maximum amount of 7, 5 percent of your pensionable salary.

There is also tax relief for your employer’s portion if your company contributes towards your pension.

If you belong to a provident fund you are not taxed but your employer will be. The new tax plan is much easier to follow and to understand.

Although you company will be taxed as “fringe benefits” , you will now be the master of your own destiny as you will  be in a position to deduct your own contribution from your taxable income of up to 22,5 percent of your annual income. There are always exceptions to rule, though; if both you and your company contribute more than 22, 5 percent of your annual taxable income towards your pension or retirement annuity, you will no longer be able to withdraw the whole amount, and should you earn more than R880 00 per annum the limit will not be 22, 5 percent, but will be a lower amount. You will also not be allowed to withdraw more than R200 000 a year.

The new taxes can have a negative effect on your cash flow, but if employees tax employers on a monthly basis, this will not have such a negative impact on the individual contributor.

Plan wisely and start contributing towards your pension when you are young as most South African’s do not provide adequately for their retirement years.

Most people look forward to a retirement where they can devote more time to the pastimes they enjoy. However, when it comes to retirement planning and pensions, a veil of confusion tends to cloud their perspective.
 
The essential fact about retirement planning is that it is simply making provisions out of your current income and investing for the time when you come to retire. Though many countries provide some retirement income for their citizens, it is ultimately up to the individual to make provision and, in this way, providing for retirement is no different than setting aside money for any other future purpose such as a new car or holiday.
 
The significant difference between retirement planning and other investment objectives is one of magnitude. In retirement, we expect a continuation of, at the very least, our current standard of living. Given that we spend an increasing proportion of our lives in retirement, combined with reduced State benefits, the need for early, effective retirement planning has never been greater.
 
What you can afford to contribute to ensure your future is dependent on many factors; including your current, ongoing financial commitments  Werecommends you contribute 15% of your income, throughout your career, as a good benchmark for achieving a financially independent retirement.