By Jerry Botha, managing partner, and Jean Du Toit, head of tax technical at Tax Consulting South Africa

As announced in the Budget Speech, any South African leaving in future will be subject to a much stricter process from 1 March 2021 onwards.

But there was also a surprise 3-year lockup announcement for anyone with a South African pension fund, seeking to leave South Africa.

This appears a sign of things to come for private pensions in South Africa. Anyone with a proper pension, ideas to move abroad or just not trusting governments plans with your pension money; needs to “read the room” and make careful decisions.

Current position under law

Under the current dispensation, the definitions of “pension preservation fund”, “provident preservation fund” and “retirement annuity fund” in section 1 of the Income Tax Act No. 58 of 1962 (“the Act”) contain a proviso that entitles a person to withdraw their retirement benefits before retirement age.

This applies where that person “is or was a resident who emigrated from the Republic and that emigration is recognised by the South African Reserve Bank for purposes of exchange control”.

In essence, this proviso, which reads the same for each of these definitions, permits a person to withdraw their retirement benefit upon completion of a process of emigration through the South African Reserve Bank.

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