What are the risks and benefits?
THERE IS a widespread misconception among people using the living annuity products offered by South African investment houses, relating to how much of their portfolio they can hold offshore. More specifically, many believe they can hold no more than 45% of a portfolio offshore.
In reality, if they use the right investment tool, they can have a 100% offshore living annuity. If investors are to take advantage of a 100% offshore living annuity, however, it must form part of a well-balanced portfolio, rather than being viewed as a single solution.
The confusion likely comes from the fact that the Pension Funds Act restricts certain funds to have a maximum of 45% of their assets invested offshore. So, once they get closer to that limit, they have to close off new investments into offshore assets.
Those limits do not, however, mean that individuals can only hold up to 45% of their own portfolios offshore.
It’s an important distinction, because many South Africans feel that their living annuities—which allow them to draw an income from their retirement savings while keeping their capital invested—could achieve more with greater offshore weighting.
Should someone decide to go with a 100% offshore living annuity, however, they must be aware that it also comes with risks.
Understanding the limits
Before digging into what those risks and opportunities are, it’s worth taking …
Join Now
