It seems what is said to anyone who wants to transfer their pension fund to another country is to take good advice to avoid pitfalls. It can go badly wrong in some cases.
I read this on one such adviser's site.
An employee leaving South Africa who has a pension fund will need advice. Depending on the rules of the fund in question, the following options may be available:
. continue contributing to the South African scheme;
. freeze contributions and make use of a preservation fund; or
. cash out, if this is possible, and pay the tax up front.
If the last option is selected and the fund is cashed out before retirement, the South African tax consequences will be unfavourable. In any case, the facts must be examined carefully and the decision will ultimately depend on the individual's plans and aspirations, and in particular on whether the individual intends to return to South Africa.
It should also be noted that an individual who relinquishes his/her South African tax residence will become subject to capital gains tax on all his/her assets. Provision must be made for group life, disability and medical cover for employees leaving South Africa and as the costs of taking out such coverage in a foreign country can be prohibitive, this also requires careful consideration.
Financial advisers obviously have a vested interest in getting you to take advice, but I have heard previously that it can go the wrong way if it's not done the right way.
