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Can you borrow money from your retirement annuity in South Africa?

By November 28, 2022October 5th, 2023FinGlobal

Can you borrow money from your retirement annuity in South Africa?

November 28, 2022


As the retirement annuity encashment specialists of choice for South African expats, we get asked a lot of questions about retirement funds and emigration. To make it easier for South Africans planning their international relocation, we’ve put together a quick guide on some of the most common expat questions that we receive about retirement annuities.

I need hard cash to pay for my international relocation – is it possible to borrow money against my investments or my retirement annuity?

Borrowing against capital investments: Answering this question depends on the type of investments that you hold. The type of funding you are looking for is generally known as Securities-Based Lending. This form of lending gives you financial flexibility and makes it possible for you, as a share investor, to keep working towards creating or sustaining wealth without disrupting your long-term investment goals. You will need to be clear with your bank or financial institution that you will be using the funds to relocate and make an appropriate repayment plan that takes into account your new location.

The following movable assets are eligible to be used as collateral:

  • Listed shares
  • Unit trusts
  • Local cash investments
  • Preferential shares
  • Exchange traded funds
  • Real estate investment trusts
  • Government bonds
  • Offshore investments (assessed on a case-by-case basis to determine acceptability)

Borrowing against your retirement funds: You will only be allowed to borrow money from your pension fund if:

  1. Your fund rules are structured to permit this
  2. The loan is for housing-related purposes (i.e: you intend to purchase a home or settle a loan in respect of a property you or your financial dependants live in).

Can my retirement fund give me or help me get a loan?

In short, getting a loan from your retirement fund is unlikely. Your retirement fund can only lend you money, or act as a guarantee for a loan, if the loan is used to buy, build or renovate a property which you or your spouse occupy as a member of the fund. Assuming that you are already or want to relocate overseas, it’s unlikely that your need will match this requirement.

Although very few retirement funds lend money directly from the fund, there are a few that do. These will allow you to borrow against your own retirement fund value and repay the loan and the interest into your own account. Some funds might be willing to lend you money from an allocated portion of the fund and the interest charged on your loan will be calculated so as to benefit all members. It will be necessary for you to enquire directly with the trustees/administrators of your fund.

Can I get my retirement annuity early?

For South Africans still living in the Republic, options for early withdrawal of retirement annuities are limited. Once you have permanently relocated, the game changes. Although it is no longer as straightforward as it once was to access retirement annuity funds before the age of 55 from overseas, it is still possible. Before 2021, emigrants were able to access their funds once they had completed formal emigration through the South African Reserve Bank (SARB) for immediate access to their retirement annuity withdrawal benefit.

Legislative changes that came into effect last year have lengthened this procedure considerably. Today, the only way to access retirement annuity  funds before official retirement age is through the process of tax emigration through the South African Revenue Service (SARS). When can I cash my retirement annuity in full?

As mentioned, you will need to undergo tax emigration with SARS once you have left South Africa. This means that you will need to gain the tax authority’s approval to change your tax status from resident to non-resident. Once you have received the SARS non-resident confirmation letter you will need to wait three years before your funds will become available to you. At this point, you will be allowed to withdraw your retirement annuity  in full, subject to the payment of lump sum tax on retirement payouts.

Can I borrow from my annuity to buy or pay off a house?

This question is not strictly for emigrants, but it is still relevant if you intend to hold onto immovable property in South Africa, because your spouse or financial dependents still live in this house. The Pension Funds Act does make provision for funds to give members a loan or guarantee their loan if that loan is used to buy, build or renovate a property that is occupied by the member or their spouse. These loans are at the trustees’ discretion and are typically only provided by employer-sponsored funds. This could be an effective way to clear any home loan debt if you are leaving dependents behind in South Africa.

FinGlobal: cross-border financial specialists for expats

When it comes to tax emigration and retirement annuity encashment, FinGlobal should be your first choice for expert assistance. Don’t simply take our word for it – read our client testimonials and then get in touch. We’re waiting to assist you in making your financial transition as smooth and stress-free as possible.

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