South Africa Tax Advice on British Pension Transfers


We are not tax advisors but we do understand taxation of pension funds in the UK. This page is not designed to give you personal South Africa Tax Advice on British Pension Transfers but is designed to provide information that will help people understand the type of South African Tax Advice on UK Pension Transfers they should be seeking.

Assuming you are 55 or older then the Double Tax Treaty (DTT) between South Africa and the UK allows for individuals to obtain their Pension Commencement Lump Sum (PCLS) without any tax being applied. Individuals need to check  if there are any local  taxes which will apply, and talk to your local advisors regarding South African Tax Advice on British Pension Transfers.

The Double Tax Treaty (DTT) between South Africa and the UK allows for individuals to obtain their income without UK taxation applied, under a special provision and a form that needs to be completed. This means the income from the UK pension fund is treated purely under South African tax rule (under review regarding foreign pensions). You must be 55 or older to access your income from a UK pension. Talk to your local advisors regarding South African Tax Advice on British Pension Transfers.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

The Double Tax Treaty (DTT) between South Africa and the country that your QROPS is paramount. For example for Gibraltar there is no DTT, so whereas the UK allows for individuals to obtain their income without UK taxation applied, tax must be paid in Gibraltar making Gibraltar less tax efficient. Also, tax within a QROPS is dealt as a trust and can incur additional tax. Investment Bonds are often recommended for “tax efficiency” but, in essence they are an extra tier of charges to avoid a tax that would not have been applied had the pension been left in the UK; our own calculations mean that charges are roughly 200-400% higher using a QROPS as against a UK pension (Yes, not a miss-print, charges are 2-4 times higher in a QROPS) thus wiping out any supposed tax advantages.

Talk to your local advisors regarding South African Tax Advice on British Pension Transfers.

No, you do not avoid taxes! The pension income is declarable in South Africa exactly as before. See previous point, as you can pay higher charges when using a QROPS which wipes out any supposed tax efficiency.

Indeed, those offshore companies claiming that additional tax is saved from utilising a QROPS over a UK pension, fail to point out that, in most cases, HIGHER potential taxes will apply within a QROPS and there are potential penalties. The exception maybe those with funds in excess of £1,000,000 that may be hit by the Lifetime Allowance ; contact a UK registered adviser to understand the Lifetime Allowance and its tax implications.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

Taxation within a UK pension, and access to the pension both in terms of Pension Commencement Lump Sum (PCLS) and income is dealt with via the interaction between UK pensions, tax for non-UK residents and the Double Taxation Agreement (DTA) that exists between the UK and South Africa. As of April 2016 this is very advantageous for UK pensions paid to South African residents under current legislation (which of course can change).

No, we have covered this in the points above.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE.

You must always declare your funds, and PCLS and any income in South Africa. How they are then treated will depend on the SARS position on UK pension funds and Gibraltar trusts.

There are possible savings of UK tax for those clients with funds in excess of £1,000,000 who would otherwise be hit by the Lifetime Allowance ; again this may not be correct due to the ability to action “lifetime Allowance Protection” at much higher fund values. Contact a UK registered adviser to understand the Lifetime Allowance, Lifetime Allowance protection and its tax implications and a South African tax advisor to understand the tax rules.

Rarely due to new rules. NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

Outside of this it will come down the Double Tax Agreement between where your pension is based (the UK, Gibraltar or Malta) and the way in which local taxes apply where and when you retire. This last part is critical, it is where you retire that counts, not where you currently live and not purely where your pension resides!

Also, it is where your beneficiaries live as well. Once you die then funds will be made available to beneficiaries and taxed on where they live, not where you live!

The answer is a simple – No, and Yes! There are taxes on funds within pensions that cannot be reclaimed. Talk to your local advisors regarding South Africa Tax Advice on British Pension Transfers.

NOTE Budget 2017 – Any UK pension transfer post 9 March 2017 sent to a QROPS in a different country from the recipient outside the EEA is likely to result in the pension transfer to be taxed 25% on the full transfer – End of NOTE

The Qrops in South Africa (SA) are  retirement annuities (RA) and living annuities (LA). The first is for accumulation, the second for generating a retirement annuity. The retirement age is 55, so anytime from then a person can retire from their RA and move the proceeds to a LA. They can then take one third in cash, but if that’s more than R500k, stepped tax rates kick in. So the maximum tax-free lump sum is currently ONLY R500k.

There are various benefits and restrictions:-
All growth and interest is tax free, only annuity income taken is taxed (at standard tax rates)
Stipulate beneficiaries, stays outside estate and free of estate duties
RAs and LAs are denominated in SA Rands only
RAs have investment restrictions – called Regulation 28. Restricts asset class allocations, most importantly the foreign allocation is 25% maximum
LAs don’t have such investment restrictions
It may not be possible to transfer from an SA QROPS. This is a very limited market.

A SIPP is a UK pension, so it is tax neutral. However, there may be considerable other advantages of utilising a SIPP other than tax reasons. See other pages of information on SIPP on this website.

Aisa International is not licensed to give tax advice on pension transfer matters – nothing on this page or website should be construed as personal tax advice in South Africa but only as guidance on the questions you should be seeking answers to.

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