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Following Your Children Overseas Will Affect Your Pension Fund After Retiring

Your children have grown and flown the coop, and have decided to settle and raise their families overseas, and you have to decide what to do with the rest of your time; do you follow your children, but what are the repercussions and how would that affect the nest egg you so carefully worked towards and put aside; all that hard-earned money for your golden years.

For example, a retirement fund cannot be transferred to a fund in New Zealand. The funds have to be released here first, with taxes paid on these funds.

All about Pension Funds in SA
• Only one third of a person’s retirement fund is paid out in a lump sum when an individual retires.
• The balance has to be utilised for a monthly income, or a pension.
• The third that is paid out in cash is taxed by SARS.
• If the individual has never received any retirement reimbursements, then the first R315 000 won’t be taxed.
• The balance of the paid out amount will be taxed as any other monthly income would be.
• The remainder of the money that is invested is not allowed to be transferred to a new offshore fund.
• This is not permitted by SA law.
• This is also prohibited by many SA pension funds.

So, if a member decides to immigrate then what steps can that person take to overcome the situation?

• The third that is paid in cash is first taxed before he can take it overseas.
• The balance will be paid out in the foreign country.
• This will form a portion of the total amount in foreign currency allowed for immigrants.
• The total amount is R4 million for single individuals.
• For families it amounts to R8 million.
• Take note that the income that is earned in SA from the rest of the investment will be paid out, without any limits, in the foreign country, but only once the amount has been taxed in SA.

If the pension fund member would like to resign from the pension fund prior to retirement, and if the pension fund is agreeable, the money can be transferred to another fund or a preservation fund in SA without it being taxed.