In the current precarious economic climate, South African residents over age 55, who invested in retirement annuities (RAs), preservation funds or pensions, are increasingly transferring their investments to living annuities with offshore equity exposure.

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Claudia Mendes, international financial planner at Sable International, considers the argument for going offshore.

South African residents find themselves investing in a country that has a concentration of resource stocks and a volatile currency. With South Africa being 1% of the global stock market sell-offs globally have a habit of hurting both the SA equity market and the currency at the same time, said Mendes.

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“This ‘double whammy’ effect has hurt too many retirement accounts for South Africans.” Most people are not aware that when funds move from a retirement annuity or pension – covered by the Pension Funds Act and pension regulations – into a living annuity, these funds are no longer constrained by Regulation 28.

While your pension funds are accumulating in South Africa, they are bound by this investment restriction, which allows only 30% of the fund to be invested offshore.

Once your pension funds go into the living annuity environment, however, you have “retired” and are no longer bound by Regulation 28, so you can take your living annuity offshore.

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