Thanks for posing this very attention-grabbing query which can be related to many Moneyweb readers.
I can perceive your frustration, as over the past 20 years for the reason that inception of this retirement annuity (RA) your understanding was that the construction would can help you have capital paid to you wherever on this planet on your retirement and now at maturity you discover that this isn’t the case.
If I keep in mind a majority of these RAs once they have been launched accurately, I recall considering on the time that these wanted to be defined very rigorously to an investor, or the investor may very simply misunderstand what the product may and couldn’t present.
I need to stress although, that counting on my reminiscence going again 20 years or so isn’t the proper option to offer you a suggestion on this format.
The perfect recommendation I can provide you presently
My suggestion is that you simply collect up as a lot info you’ve gotten on this retirement annuity and seek the advice of an unbiased funding advisor, who will probably be ready to analyse it, specializing in the construction and guidelines that ought to be stipulated within the coverage doc.
I’d add that you have to be ready to pay this unbiased funding advisor an hourly payment to analyse this RA for you in order that you’ll obtain an unbiased, unbiased and factual consequence.
If nonetheless this retirement annuity is structured as I keep in mind, then the next would apply:
RAs fall below the pension fund guidelines in that they are often matured at any time after the investor has turned 55. At the moment the investor can solely entry one third of the capital in money (a few of this may increasingly or is probably not taxable however I’m going to go away this level for dialogue for an additional time). The stability needed to be paid into an annuity from which the investor would draw an revenue, which might be taxable.
Though you might be disenchanted by the truth that you had maybe misunderstood the construction of this “offshore retirement annuity”, or could not have had the construction of this funding correctly defined to you, you should still have loved an a variety of benefits by having this explicit RA.
I consider that we have to at this stage depart what has occurred in previous alone and deal with the benefits of having this offshore RA.
The benefits you’ve gotten loved throughout the time period of the offshore retirement annuity:
- The contributions you made to the offshore RA could have been tax-deductible (based mostly on the bounds of contributions to RAs);
- Through the time period any curiosity earned, dividend distributions obtained and capital features wouldn’t have been taxable; and
- You’ll have been invested in laborious offshore forex, with entry to hard-currency-based underlying funds that will make investments your capital in international markets.
What are you able to do now that the offshore retirement annuity has matured?
In easy phrases, regular RA/pension fund guidelines will apply.
One may depart the capital invested within the offshore RA if you don’t but must dwell off the capital at this stage. The capital would stay invested in international forex inside your offshore RA, and you wouldn’t be required to make additional contributions until you needed to.
Secondly, you possibly can elect to take as much as one third in money. This might be topic to retirement lump sum profit tax remedy. I’d additionally advise you (or the unbiased funding advisor that you must seek the advice of as talked about above) to test with Momentum, however I’m fairly sure that this money profit would should be paid to you in South Africa and in rands.
The remaining two thirds would should be invested in an annuity from which you’d draw an revenue.
I do be aware that your want could be to buy an offshore annuity.
As we’ve established, buying an offshore annuity wouldn’t be potential, however I do know that Momentum Wealth does have an offshore dwelling annuity, which is a South African dwelling annuity that invests your capital in international forex in offshore funds.
The revenue from this offshore dwelling annuity could be paid to you in South Africa in rands and the revenue drawn would should be chosen by you and be between 2.5% to 17.5% of the capital worth every year. The revenue, as talked about, could be taxable.
One may I suppose reinvest the web revenue from such a dwelling annuity in offshore markets utilizing the offshore funding allowance if one wished, supplied the revenue isn’t required to be lived on.
In my view, I’d recommend that you simply/your advisor contact Momentum and ask if the next could be potential by way of its funding constructions:
- Would it not be potential to commute the offshore RA to an offshore dwelling annuity, then have the items held within the fund underlying the RA transferred to the dwelling annuity – thereby successfully avoiding the capital coming again to South Africa, and having it reinvested in international forex?
This might keep away from any potential loss because of any international alternate charge fluctuations.
One would wish to understand that this might solely be potential if the identical underlying fund is used within the offshore dwelling annuity because the offshore RA, and supplied that Momentum is maintained as the general product supplier.
If the above is feasible, then we’ve in a approach stored your retirement capital invested offshore.
In closing, it’s crucial that the next be thought of …
I’d urge that step one is to have this offshore RA analysed by a very good unbiased monetary planner/funding advisor prior to creating any remaining determination, as there may be merely not sufficient element supplied to us on this query to have the ability to present a complete response on this format.
Secondly, we have to understand that as soon as a RA has been commuted to an annuity this can’t be reversed.
Thirdly, different points ought to be considered, corresponding to your personal private monetary circumstances which can’t be realistically mentioned satisfactorily on this format.
Thanks for participating with us.
We hope this assists in offering an answer to your funding portfolio planning necessities.