May 26, 2021
Ninety One Assurance Ltd (the issuer of the Ninety One sinking fund policy) is only permitted to conduct “market-linked business” and when writing policies, the value of its liabilities must at all times match its assets. This means that, although the underlying value of an investment policy may decrease, investors are protected due to the fact that Ninety One Assurance is not licensed to conduct any guaranteed business and therefore Ninety One Assurance will never be in a position where its liabilities are greater than its assets.
Endowments (due to having a life assured) offer protection against creditors in terms of Section 63(2) of the Long-Term Insurance Act, once the policy has been in force for at least 3 years, whilst sinking funds do not.
The following components are important to keep in mind when a product provider like Ninety One offers a sinking fund with a loan facility:
One loan and/or one surrender during the first 5 years of the policy, limited to a maximum of all contributions made plus 5% compound interest. Multiple loans/surrenders after maturity, or once inherited from the deceased.
The basic rule is that non-residents are taxed in SA on their income from an SA source. However, there may be a double taxation agreement between SA and the country of residence which determines which country has the right to tax the annuity income. If the other country has the right to tax the income, the annuitant may apply for a tax directive from SARS.
A disposal of a person’s worldwide assets (with certain exceptions) for CGT purposes will be deemed to have occurred when a person ceases to be a SA tax resident. The amount of the CGT is based on the market value of the asset on the day before ceasing to be resident. The client will be liable for interest/penalties if not applied at the time.
The client’s accountant, bank or any authorized dealer to kick start the initial process. From there any good cross border tax consultant to assist the client with the details of tax consulting and planning. It may be better to first speak to a tax consultant, before starting the process to be non-resident.
Retirement Funds (and living annuities) are currently exempt from CGT.
It depends on the source of income, the investor’s age, planning needs as well as his liquidity requirements. The RA is normally a good place to start, because of the limited liquidity prior to retirement age.
For more articles & videos on funding retirement visit our Masterclass series hub.
“Using a testamentary trust as a beneficiary of an ILLA can be a good option if the spouse is mentally incompetent, as would be the case with Alzheimers and where the Power of Attorney is no longer valid. It allows the spouse’s income to be managed by a trustee, bypassing the need for appointment of a curator or administrator – provided there are no other assets in the spouse’s estate.”