South Africans living abroad and invested in South African retirement annuities (RAs) will be able to transfer their investment to a living annuity with full offshore exposure through investment group Sable International.
On retirement, South Africans with RAs can take out a third as a lump sum and transfer the balance to a living annuity where they can draw down 2.5% to 17.5% per year.
Their RAs were invested in portfolios with a maximum of 30% offshore exposure in terms of Regulation 28, and while this threshold does not apply to living annuities, most providers keep their asset-swap capacity for big corporate clients and high net worth individuals, leaving other investors with a similar threshold to their RAs.
This creates a problem for those living abroad as their retirement funds are directly linked to the value of the rand and SA’s economic prosperity, said Niel Pretorius, wealth adviser at Sable International, to local media outlet BusinessLive.
As many of its clients have retired abroad or are approaching retirement, Sable, along with the annuity providers and investment managers MitonOptimal and Momentum, created a way for them to invest completely offshore, with global investment diversification.
Niel Pretorius, wealth advisor at Sable International, told local media news outlet Money Web that 100% of the Sable International Living Annuity will be invested offshore using globally diversified offshore funds, via an asset-swap mechanism with Momentum Life.
“If you live in sterling, you want to benefit from your investments in sterling. It makes total sense for your investments to be in your domestic currency rather than in rand and with little or no offshore exposure,” adds Pretorius.
In SA, once a retirement annuity or pension fund is transferred into a living annuity, it can’t leave the country as a lump sum. There is no way to transfer a living annuity abroad other than when it has been reduced to a prescribed amount (usually R50,000). Clients who have already left SA and who are living in a different currency zone and economic environment typically want to avoid a previously saved pension pot remaining in SA.