South Africans planning to put their retirement fund money into living annuities or who have recently done so may find that their exposure to offshore funds in these investment vehicles will be limited.
Once this threshold is reached, these companies restrict offshore exposure in products such as living annuities, endowments, and tax-free savings accounts.A Moneyweb reader recently had this experience when Allan Gray advised him there is a 45% restriction on offshore exposure in their living annuities. Sygnia imposes a 40% limit.
At the time when she decided to convert the money in the preservation fund to a living annuity, the offshore portion of the investment was at 65%. “We weren’t concerned because we were under the impression that offshore limits don’t apply to living annuities.”However, when she applied to keep the percentage allocations in the preservation fund the same when switching to a living annuity, she was told that she was exceeding her offshore limit.
Megan Williams, spokesperson at Sygnia, explained that under normal circumstances, living annuities do not have the same offshore exposure limits as retirement funds, which are governed by Regulation 28. “We understand this may be confusing for investors who might expect the flexibility of 100% offshore exposure.
Source: News Formal (newsformal.com)
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