Can You Cash Out Your South African Retirement Annuity While Living Abroad?

Michael Kransdorff
3 days ago
6 min read

A South African living abroad can access their retirement annuity before age 55 after three years of non-residency — but the retirement fund, not SARS, decides whether your application even reaches SARS. Here's how the rules actually work.

Short answer: Yes. If you have ceased to be a South African tax resident and have remained non-resident for an uninterrupted period of three years or longer, the Income Tax Act allows you to withdraw the full value of your retirement annuity (RA) before age 55 — not just the usual one-third lump sum. This has been the law since 1 March 2021.

The catch: You cannot apply to SARS for the required tax directive yourself. Only your retirement fund or its administrator can submit that application. If the fund isn't satisfied with your evidence of non-residency, it can simply refuse to submit it — and you have no independent way of getting SARS to consider your case.

A recent Financial Services Tribunal ruling (Du Plessis v Pension Funds Adjudicator) confirms this is a real, recurring problem — and clarifies what funds can and can't demand from non-resident members.

Key Takeaways

Non-residents of three years or more can access their full RA benefit before retirement age, per section 1 of the Income Tax Act's "retirement annuity fund" definition, effective 1 March 2021.
Only the fund or its administrator — not the member, their attorney, or their tax practitioner — can apply to SARS for the withdrawal tax directive.
Retirement funds frequently apply outdated checklists, including demands for a blocked rand account, a requirement from the pre-2021 financial emigration regime that no longer applies.
The Financial Services Tribunal has ruled that funds are gatekeepers, not arbitrators: if a member provides reasonably available evidence, the fund should submit the application (recording any reservations) and let SARS decide.
Proving non-residency is a substantive legal question involving ordinary residence, the physical presence test, and applicable double tax agreements (DTAs) — not just time spent outside South Africa.

Why South Africans Living Abroad Can Access Their Retirement Annuities Early

Since 1 March 2021, South African retirement annuity funds have been permitted to pay out the full benefit — rather than the usual one-third cash / two-thirds annuity split — to a member who has ceased South African tax residency and remained non-resident for an uninterrupted period of three years or more.

This rule exists independently of exchange control. It's a tax residency test, not a "financial emigration" application through the South African Reserve Bank (SARB), a process that itself changed fundamentally from 1 March 2021.

The Problem: Your Retirement Fund Controls Access to SARS

Before an RA fund can pay out a withdrawal benefit, SARS must issue a tax directive. Under the Income Tax Act, only the retirement fund or its administrator can apply for that directive.

In practice, this means the fund acts as the sole gatekeeper to SARS. If the fund is satisfied a member has proven non-residency, it submits the application. If not, it can decline — and the member has no mechanism to compel SARS to consider their case independently.

This is precisely what happened to Barend du Plessis, whose case went to the Financial Services Tribunal after Discovery refused to submit his directive application. The Tribunal set aside the earlier Pension Funds Adjudicator decision and sent the matter back for reconsideration.

Where Retirement Funds Get It Wrong

The Tribunal found that Discovery had asked itself "at best, half of the right question" by reducing non-residency to a documentary checklist — fiscal residency certificates, travel logs, exit stamps.

More significantly, the fund was still insisting on proof of a South African blocked rand account: a requirement from the formal financial emigration regime that ceased to apply for these purposes on 1 March 2021, five years before the case reached the Tribunal. Nothing in the fund's own rules required payment into a blocked rand account.

This is a pattern the Institute for International Tax and Finance sees regularly: tax rules and exchange control rules change, but fund administrators' internal checklists don't keep pace — leaving legitimate non-resident members stuck.

But Retirement Funds Aren't Wrong to Ask Questions

The ruling isn't a blank cheque for members either. The Tribunal also found that Du Plessis had not yet discharged the onus of proving his non-residence on the evidence before it. He had supplied a Dutch population register extract, a Dutch passport, a Danish tax assessment, and affidavits — but had never clearly identified which part of South Africa's residence test he relied on, or the exact date he ceased being tax resident.

Common evidentiary gaps the Institute encounters:

No record of the exact date of departure (old passports lost, entry/exit stamps missing)
Multiple countries of residence over time, without a clear non-residency narrative
An inactive SARS tax number that was never formally updated to reflect cessation of residency
Foreign tax documentation that doesn't match the specific "fiscal residency certificate" format a fund expects

None of these gaps is necessarily fatal — but they need to be addressed head-on, not papered over.

What "Non-Resident" Actually Means for Retirement Annuity Withdrawal Purposes

South African tax residency isn't determined by a simple day count. It requires assessing:

Ordinary residence — where you have established your real home, and where you return to
The physical presence test — the statutory day-count test under South African tax law
The applicable double tax agreement (DTA) — where South Africa has a DTA with your country of residence, the treaty's tie-breaker rules can determine (or override) your residency status for tax purposes, independently of South Africa's domestic tests

Funds that reduce this to a single document (a stamp, a certificate) are, as the Tribunal put it, testing only part of the question.

The Tribunal's Core Finding: Gatekeeper, Not Arbitrator

The Tribunal drew a clear distinction: a fund is entitled to be satisfied that a member meets the legal requirements before certifying a withdrawal — but the fund is not SARS, and cannot treat its own view as final.

Where a member has provided the information reasonably available to them, and explained under oath why further evidence can't be obtained, the appropriate course is for the fund to submit the application to SARS, record its reservations, and let SARS — the body actually empowered to issue the directive — make the call.

Practical Guidance for South Africans Living Abroad

Establish your exact date of non-residency cessation and the legal basis for it (ordinary residence test, physical presence test, or DTA tie-breaker).
Formally notify SARS that you have ceased to be a tax resident, rather than leaving your tax number dormant.
Gather documentary evidence proactively — don't wait for the fund to specify a format your foreign tax authority doesn't use; address the gap directly and explain why in an affidavit if necessary.
Check your fund's requirements against current SARS guidelines — a demand for a blocked rand account, or other pre-2021 financial emigration documentation, may simply be outdated.
Get the tax advice right before you apply — a rejected application can mean years of delay, as Du Plessis's case shows.

Frequently Asked Questions

Can I access my South African retirement annuity while living abroad? Yes, if you've ceased South African tax residency and remained non-resident for an uninterrupted three years or more, you can withdraw the full RA benefit before age 55.

Can I apply to SARS myself for the tax directive? No. Only the retirement fund or its administrator can submit the directive application to SARS — you cannot apply independently, even through an attorney or tax practitioner.

Does my RA fund still require a blocked rand account? It shouldn't. That requirement belonged to the pre-1 March 2021 financial emigration regime and no longer applies for RA withdrawal purposes, though some funds have not updated their internal checklists.

Does a double tax agreement (DTA) affect my non-residency status? Yes. Where South Africa has a DTA with your country of residence, the treaty's residency tie-breaker rules can be decisive in determining your tax residency status, alongside South Africa's domestic ordinary residence and physical presence tests.

What if my retirement fund refuses to submit my application to SARS? Following the Financial Services Tribunal's ruling in Du Plessis v Pension Funds Adjudicator, a fund that has been given reasonably available evidence should submit the application to SARS with its reservations noted, rather than refusing outright. Members facing an outright refusal have grounds to challenge this via the Pension Funds Adjudicator or the Tribunal.

This article was first published in the Common Sense: https://www.thecommonsense.co.za/Editorials/your-retirement-savings-are-held-hostage-outdated-checklist