Posted on: 23-11-2015 in Retirement PlanningAs a South African living abroad it concerns me to see how many South Africans expatriates are still investing in expensive Retirement Annuity investment plans that yield lower than expected returns and offer absolutely no tax rewards for the client. Investors often stay in this type of investment simply because their financial advisor “back home” in South Africa recommended it to them years before they left the shores, or their adviser only considered South African tax laws when implementing the plan for the client. As an expatriate, if one continues to invest in a South Africa Retirement annuity they will not receive any tax incentives on contributions paid into the retirement annuity but when the time comes for you to live off your hard-earned savings you will still be charged at the marginal tax rates set out by SARS (South African Revenue Service). Financial advisers in South Africa often sell retirement annuities based on the tax advantages that a client will receive during the contribution stages of the investment. This is a very valid point for anyone living within South Africa but should you leave the country this is no longer valid. One cannot receive a tax incentive from SARS if they are not being taxed by SARS. Obviously saving for your retirement is always a great idea and forms an essential part of one’s financial planning portfolio, but South African retirement annuities are not an effective savings instrument for people living abroad. I have made it my mission to inform expatriates of the many other options that are available to them in the hope that I might help them consolidate their entire investment portfolio in an off-shore trust, that ultimately yields great returns and completely eradicates the issue of paying tax when it comes to living off the funds that you have worked so hard at saving up during your working career. It is at this point that I would like to introduce the concept of 40(ee) investments. 40(ee) refers to the SARS compliant, section 40(ee) of the Guernsey Income Tax Law of 1975. This may sound like a lot of financial jargon, but effectively what 40(ee) represents is a world of opportunity for investors in South Africa and South Africans who have travelled far and wide but still have active or paid-up investments sitting dormant within South Africa, as well as South Africans who are looking to start their investment portfolio from scratch. This is a low cost and highly effective method of planning for your retirement, allowing you to accumulate wealth in a manner that fits your financial circumstances, with the flexibility to change whenever your financial situation changes. Although a plan like this can accommodate fixed monthly contributions, they are not essential and an investor can add assets and lump sum cash injections at any time. As everything within the fund is free from income tax and capital gains tax, due to the fact that the entire plan is held in a Guernsey retirement fund, the growth on your investment will be maximised from the outset. With the list of benefits being endless I could go on for hours but a few of the main benefits are listed below:
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