Preservation funds for expats: What you need to know before leaving your South Africa

A preservation fund is a retirement savings vehicle that allows you to grow and preserve your retirement savings, funded by a lump sum transfer from a provident or pension fund when changing jobs and moving employers. The tax-efficient vehicle allows for the funds to grow over time and for the returns to compound until retirement, which may result in more capital available to you for retirement.  

For South Africans considering moving overseas, it’s important to understand the implications for your preservation fund. You should be aware of the options available for you in order to make the right decisions and to protect your hard-earned retirement capital over the long term. In this article, we cover all the key information surrounding preservation funds and what you need to know before leaving the country.  

What is a preservation fund?  

It is a tax-efficient means of growing funds which may have accumulated in your provident or pension fund while working for a specific employer. If you decide to leave your job, you can then transfer any pension or provident fund money across to a preservation fund. Unlike cashing out these savings, which would stop investment growth and incur tax, a preservation fund allows for a smooth, tax-free transfer to a provider who invests the funds on your behalf. This would further allow the funds to potentially compound and grow over the long term. 

A preservation fund is not the same as a retirement annuity or provident/pension fund, as it does not allow for any additional contributions after the lump sum contribution. The lump sum transfer is also tax-exempt. People use preservation funds to keep retirement savings on track despite changing jobs. By staying invested, you can maximise the potential growth of your savings to provide for yourself through your retirement years. 

10x offers attractive preservation fund options with low fees. Our fund options are diversified across the asset classes, with a track record of excellent returns over the long term. The 10x Your Future Fund is best for investors seeking long-term capital growth that is achieved with cost-effective exposure to a range of local and international asset classes, while the 10x Moderate Fund is best for investors seeking capital growth with a lower level of volatility than a high equity portfolio over the medium to long term. 

Before deciding on a preservation fund, it’s important to compare fees, fund performance, and evaluate the options available. To find out more about 10x’s preservation fund options, follow this link.   

Emigration and accessing your preservation fund  

It can be tempting to withdraw your funds from your preservation fund, but if you keep the funds invested, you can take advantage of the returns that potentially accumulate over time. Early withdrawals are highly taxed, with only the first R27,500 tax-free, so it’s often best to avoid this. 

Since September 2024 and the implementation of the Two Pot Retirement System, the rules regarding withdrawals have changed. All contributions are now split between a ‘savings’ and a ‘retirement’ pot. There is also a third pot called the ‘vested pot’, which refers to all contributions prior to September 2024.  

The vested pot can be accessed according to the withdrawal rules that were in place before September 2024. This means one withdrawal before retirement age. The retirement pot cannot be touched until retirement age. You can access the savings pot once per year for a minimum amount of R2000. You would therefore be able to access the savings pot portion of your preservation fund prior to financial emigration. This should only be in case of emergencies, as it is best to keep the funds invested and allow for potential growth.   

Prior to March 2021, you could notify the South African Reserve Bank that you were emigrating, confirm your tax resident status and then withdraw your retirement funds immediately. In March 2021, new legislation came into effect, and the ‘three-year rule’ was implemented. This means that, firstly, you must no longer be a South African tax resident and notify SARS thereof. Secondly, you must not have lived in the country for the last 3 years or longer. Both steps need to be completed before you can withdraw your retirement funds, whether it be a retirement annuity, pension/provident, or preservation fund. In terms of the process, you need to do the following: 

1. Apply via SARS e-filing 
2. Provide proof of tax residency in another country (e.g. residency or citizenship visa) 
3. Show that you have left South Africa permanently 
4. Show proof of new address abroad, foreign earnings and assets. 

Once the above 4 steps are completed, you can then apply for an Emigration Tax Clearance certificate from SARS.  

You may not feel comfortable having retirement products in South Africa while living overseas and needing to transact or find out information on these products while living abroad. With the right resources, this shouldn’t be an obstacle. 10x offers an easy-to-use digital platform where you can access information on your preservation fund or other investments easily and quickly. 10x also understands the importance of keeping administration accessible, quick and simple regardless of whether you live locally or overseas. On top of that, our 10x consultants are available to speak to, should you have any queries or questions regarding your funds.

Tax implications for expats moving retirement savings  

Once you have ceased tax residency and waited out the 3-year period of time, you can access your preservation fund. If you have decided to withdraw your preservation fund early instead of waiting until retirement age, you will be taxed according to the following tax tables, which have been taken from the SARS website. The first R27,500 is tax-free.   

• Withdrawals between R27,501 and R726,000, a tax rate of 18% of taxable income above R27,500  
• Withdrawal between R726,001 and R1,089,000, tax of R125,730 plus 27% of taxable income above R726,000 
• Withdrawal exceeding R1,089,000, charge of R223,740 in tax plus 36% of your taxable income above R1,089,000 

You can take advantage of the retirement tax tables if you keep your funds invested in your preservation fund until retirement. This will include R550,000 tax-free, and the remainder is taxed as follows:  

• With withdrawals between R550,001 and R770,000, tax is 18% of your taxable income above R550,000.  
• With withdrawals between R770,001 and R1,155,000, tax is R39,600 plus 27% of your taxable income above R770,000. For  
• With withdrawals exceeding R1,155,000 you will pay R143,550 + 36% of taxable income above R1,155,000 in tax. 

Many countries operate by taxing your worldwide income, which means you may be taxed twice on any income received. It’s therefore important to be aware of the rules which apply in the country you are living in. There are usually two points to check: 

1. To check whether or not there is a Double Taxation Agreement between your country and South Africa. 
2. Your new country’s tax rules regarding how and when they apply tax. 

Taxation can become quite complicated for expats, so it is advised to consult a tax consultant, especially if you are in a country such as the UK, Dubai or Australia. For example, tax rules in the UK changed in April 2025, so always make sure you are up to date on the relevant information.  

Investing with your preservation fund while living abroad  

Even though you may be physically living in another country, this doesn’t necessarily need to affect your preservation fund in South Africa. It continues to potentially grow and compound this growth over time to eventually provide for your retirement years. Preservation funds enjoy tax-free growth, which means that more of the returns can be reinvested, and this adds further to the growth of the funds over time. Long-term growth of your funds should be of utmost importance: you ideally want the funds that you have transferred from a pension or provident fund to continue growing in the preservation fund. 10x offers excellent preservation fund options, which include low fees, no hidden costs, and superior returns. 10X makes use of index tracking in our investment strategy, which lowers cost to our clients even further.

Research has shown us that index tracking funds produce consistently better returns than actively-managed funds (and as mentioned, at a usually much lower cost). Actively managed funds are usually more expensive due to research and servicing overheads and the trading costs incurred when buying and selling assets.  

As a 10x investor, you can always access the digital platform quickly and easily, should you wish to see your preservation fund statements or transact, regardless of where in the world you live. If you are not happy with your current service provider, you can switch providers once per year. The process is fairly straightforward with the guidance of experienced service providers like 10x. This is still the case even if you reside abroad. To find out more about the 10x preservation funds, follow this link.  

What happens at retirement age? 

At retirement age, which is currently age 55 in South Africa, and assuming you do not want to transfer the funds to your new country, you will need to use your preservation fund capital to purchase either a living annuity or life (guaranteed) annuity. In terms of your savings pot, you can either withdraw as cash or use it to purchase an annuity. You are also allowed to take up to one-third of your vested pot as a lump sum cash amount, the remaining two-thirds of which must also be used to purchase an annuity.   

There are a few points to remember if you decide to retire from your preservation fund and transfer the funds into a South African-based living annuity. The living annuity needs to remain in South Africa. The income payments that you receive can either be paid into a South African bank account or your foreign bank account. You need to be sure of any additional banking charges which may be incurred when paying into a foreign bank account, as well as fluctuations in currencies which may impact the amount of money that you receive into your foreign bank account.  

It’s also important to remember that you will be taxed on your income in South Africa, even though you are living abroad, according to the normal South African tax tables. SARS taxes non-residents on all income that is generated in South Africa. This tax will be withheld by your service provider before the income is paid to you.  

You may also look at a life annuity, which will provide you with a fixed income for life. This will also need to remain in South Africa. It offers less flexibility than a living annuity, and it often ceases on your passing, meaning that you are not able to pass on your capital to any beneficiaries.  

Preservation fund fees 

For preservation funds, it’s important to consider how fees can affect your returns over time. When fees are low, they support long-term growth potential, but high fees can gradually reduce returns and affect the overall value of your savings. As time passes, high fees compound, which can potentially diminish your returns and reduce your capital. On the other hand, lower fees mean more of your returns can be reinvested, allowing compounding to work more effectively in your favour.  

By minimising fees, you can potentially extend the life of your retirement savings to provide for you throughout retirement. If you consider a 40-year investment horizon, research shows that just a 0.5% increase in fees can potentially reduce your final retirement amount by up to 20%, assuming all other factors remain consistent. This calculation is based on the compounding effect of fees over time. Note that the above example is for illustrative purposes, and actual results may vary. To better understand how fees impact your investments and savings, follow this link.   

10x offers excellent client service and quick and efficient processes, which allow for transfers, withdrawals and compliance to happen quickly and painlessly. With 10x, you can rest easy knowing that your retirement money is being handled efficiently and effectively over the long term, even though you are abroad.   

10x makes use of index tracking, sometimes called “passive investment” methods, to keep costs low, combined with a more active approach to asset allocation decisions in an investment strategy focused on long-term returns that produce investment and retirement outcomes our clients desire and deserve. We are committed to simplifying investments with low fees, a straightforward approach, and an exceptional track record.  

Summarising preservation funds and emigration  

The importance of being on top of your financial affairs, and particularly your retirement vehicles, has been illustrated in this article. Before emigrating, it’s vital that you understand the options available to you with regard to your preservation fund. It’s usually best to keep retirement funds invested in a preservation fund to allow for potential growth and for returns to compound, eventually providing you with capital for your retirement years.  

By withdrawing your funds, you are missing out on the growth in returns that would otherwise happen over the long term. By using a service provider like 10x, you can easily track and manage your funds, despite not being in South Africa, by using our intuitive digital platform.  

If you’d like to find out more about setting yourself up for a secure and comfortable retirement and the low-cost retirement products available on offer from 10x, reach out today and speak to one of our investment consultants.