19 Apr The Fear Of Financial Emigration

What Is Financial Emigration And Should You Do It?

As South African emigrants one of our greatest sources of information and support is our network. We turn to other Saffas who’ve already walked this road and take notes from our social media feeds to better prepare us for what lies ahead. We rely on others to tell us what to do and how to find our feet in this strange new country, especially when it comes to financial emigration. 

But although such a globally connected world can be a treasure trove of knowledge, it also tends to hyperinflate the cautionary tales and bad experiences; and such information shared in a jest or a click oftentimes does more harm than good.

Case in point is the public perception around financial emigration.

Why are people afraid of financial emigration?

Financial emigration stirs up feelings of fear and dread in expats living abroad. There are several reasons why you may find yourself mentally flinching at the term. Rand Rescue discusses the five most common reasons why people are afraid of financial emigration.

The linguistic association with risk

In recent times the overall global sentiment around “emigration” and “immigration” have sparked a flood of unrest and animosity. These terms have not only been defiled by sociolinguistic factors – such as our cultural view of immigrants and emigrants, but semantically the terms refer to “things” which are foreign.

Our minds have become accustomed to the negative connotations of these terms – both for those moving to a new country and the receiving countries. We instinctively associate unrest, instability and hostility with these words; so pairing it up with a term like “finance” would undoubtedly double-up the perceived threat of the concept. Our knee-jerk reaction is therefore to sign a retreat and avoid the risk associated with such a term. On a very basic level your fear of financial emigration is therefore not under your control – but although fear is an instinctive reaction aimed at self-preservation and survival, it’s good to acknowledge which fears are realistic, and which aren’t.

A swift calculation of probable effort

As with the semantics of emigration and finance, your second flash judgement when thinking of financial emigration is one of inadvertent calculation – your brain making projections to weigh up effort against outcome or benefit.

But unlike linguistics, these flash calculations are, in fact, based on statistics and stored data – it’s not as much intuitive as it is subconscious. According to Adam Kepecs, professor of neuroscience at Cold Spring Harbor Laboratory, your brain uses past input and experiences to make decisions the same way a statistical computer would. There are two big differences, however.

Statistical computers, for one, mostly serve a singular purpose – they don’t calculate whilst managing a complex biological and physiological network in different environments. In fact, when scientists tried to simulate one second’s brain activity through the use of computers, it took them 40 minutes using 82 944 processors in K computer and the process used 1PB (1 000 terabytes) of data for each synapse it simulated.

Now consider our emotional, cultural and mental biases – something supercomputers undoubtedly don’t have. For although we use statistics to make projections, it’s unfortunate that these statistics aren’t determined by sound fact and scrubbed data as the information used by computers. Instead, we base our decisions on our own experiences, the experiences of our friends and family members and whatever we’ve learned or heard in our training, books or at school.

Why is this significant? Well, for those of us who have emigrated, our brains will most probably rely on statistics around two sets of experiences – the emotionally and administratively gruelling process of emigration itself, as well as our experiences in dealing with financial services providers – in particular South African services providers, since the aim of financial emigration is to repatriate your funds to your new home.

Considering the abovementioned experiences, it’s no surprise that our brains project negative and/or taxing outcomes even before we’d gathered comprehensive information around the process.

It feels like cutting away the last tie with your home

You will undoubtedly not have made the decision to immigrate to your new country likely – it’s something you know is best for yourself and your family. You have gone over the pros and cons a thousand times. You are happy where you are!

But irrespective of this happiness, there will always be a part of you longing for the place which used to be home. And although you might not consider international fund transfers an emotional ordeal – for many people financial emigration feels like severing the last connection they have with the motherland.

Of course this is in no way true, but it just feels so formal and final. In fact, financial emigration is also called formal emigration. You may have lived abroad for years, but until you take that step you are not deemed a formal emigrant by South African authorities.

Much of this fear is also centred on misconstruing financial emigration as exactly this – as being formally told you no longer have any part of South Africa. Luckily, financial emigration, as formal as it is, simply cuts your ties with the South African Revenue Service. It simply means that you are no longer considered a tax resident of South Africa. Your citizenship and rights as a South African are not affected by the process and you are even eligible for opening a new account in South Africa in future (in addition to your emigrant capital account used for financial emigration), should you so wish. You are still free to trade and transfer across borders, although these transactions will no longer be governed by the tax laws imposed on South African residents.

Actually, you have no idea what your rights, options or possible benefits are

Before 2008 South Africans had been prohibited from cashing in their retirement annuities before retirement age (55) and leaving your savings behind was the only option for emigrants.

The rules have since changed, allowing South Africans abroad to withdraw their pensions, provident funds or retirement annuities before age 55 and remitting these funds abroad. Many South Africans aren’t aware of this fact, and with limited information available to explain the process, legal implications or benefits to them, they leave their savings behind.

There are, of course, certain requirements to be met in order to withdraw and remit these funds. Retirement Annuity withdrawals require saffas to financially emigrate while other types of policies may only allow for withdrawal under certain conditions or under certain thresholds. Government pensions have rather divergent rules to other pensions and these fund rules will need to be considered. Preservation funds also require some more effort if you’ve already used your one allowed withdrawal. In these circumstances, you could access the funds by transferring them to your retirement annuity and then withdrawing from the annuity after financial emigration.

You believe retirement savings should be left untouched

In our previous blog we discussed how emigration changes the rules of retirement for South Africans. Although you may have been taught that retirement funds should be left untouched, there are some significant benefits available to South African expats.

Some of these include earning higher interest through reinvesting your savings in a stronger currency, the benefits of pension incentive schemes in certain regions and mitigating administrative red tape by having access to these funds in your own jurisdiction.

Ready for financial emigration?

Now that you understand that these fears are unfounded, surely you want to transfer your hard-earned money to your new home?

Rand Rescue can assist you in cashing in your retirement savings and remitting the funds to your new home. We offer speedy service, transparent processes, and better rates than other providers.

If you’re ready to take this step, register below and we’ll help you out.