The Tax and financial planning benefits of the Ninety One Global Life Portfolio

Brief summary notes of all the tax and financial planning benefits of the Ninety One Global Life Sinking Fund Policy and the tax and financial planning benefits of local and offshore Policy wrappers.

Jun 28, 2022

5 minutes

Albert Coetzee
Brief summary notes of all the tax and financial planning benefits of the Ninety One Global Life Sinking Fund Policy and the tax and financial planning benefits of local and offshore Policy wrappers.
The following taxes may apply when investing offshore into the Ninety One Global Life Portfolio Global Sinking Fund

a. Income tax at 30% within the policy

  • Currently there is no income tax applicable because all unit trust funds within the policy are rolled up funds (accumulating fund classes).
  • Dividend withholding tax at 20% applies when investing into a share portfolio within the policy but is not levied when investing into unit trust funds.
  • There is no tax obligation on the policy holder in terms of reporting tax to authorities as the taxes (where applicable) are calculated, deducted and paid by Ninety One.

b. Capital gains tax (CGT) for any switches, withdrawals, or loans

  • Capital gains tax is calculated at 12% (40% inclusion rate x 30%) and deducted within the policy so IT3C certificates will not be issued. CGT is calculated in base currency (USD), which excludes any potential rand depreciation.
  • There is no tax obligation on the policy holder in terms of reporting tax to authorities as the CGT (where applicable) is calculated, deducted and paid by Ninety One. CGT losses are carried forward for the benefit of the policy holder.
The following taxes may apply in the event of death of the Ninety One Global Life Portfolio Global Sinking Fund policy holder

a. Probate (process of appointing an offshore executor)

Probate is not applicable, provided that the policy holder always nominates a beneficiary who survives the policy holder.

b. Situs tax, which can be as high as 40% (offshore inheritance taxes applicable mainly when investing into UK and USA registered share portfolios)

As the policy holder owns a Guernsey policy, inheritance taxes are not applicable, even if the policy holder invests into a share portfolio within the policy.

c. Capital gains tax (CGT) upon the death of a South African tax resident

The policy holder is exempt from CGT on death of the policy holder because it rolls over to the beneficiary assuming that the beneficiary is nominated and continues with the policy. It does not matter who the beneficiary is (wife/children/offshore trust/grandchildren) as long as such beneficiary is nominated, and the policy taken over. If the beneficiaries decide to take the benefit in cash, or due to being a minor or local trust is forced to repatriate, CGT will be applicable.

This is clarified in the Eighth Schedule of the Income Tax Act: “On death of the policy holder, provided the policy is transferred to the nominated beneficiary, who remains invested in the same underlying funds (unit transfer), there will be no disposal by the life company and therefore no capital gains tax within the policy. The individual policy holder may however be responsible for capital gains tax if the policy is regarded as a second-hand policy.” However, paragraph 55(1)(a) of the Eighth Schedule stipulates that “an amount derived by the nominee of the original beneficial owner of a policy will not give rise to a capital gain or loss provided that no amount has been paid for the policy.”

d. Executor’s fees for a South African tax resident

The services of an executor are not required, given that a beneficiary is nominated. However, the beneficiary must survive the policy holder.

e. Estate duty for a South African tax resident

As the investment is deemed as an asset in the estate of the deceased It is exempt from estate duty if the spouse is nominated, but this would be considered a benefit of the estate duty act rather than policy.

On death, the remaining term of the policy falls away, and the beneficiary inherits a 100% liquid investment even though staying in the policy with benefits.

Additional benefits

a. Not frozen until the estate is wound up

  • On death of the original policy holder, a death certificate and an application form from the beneficiaries, should they wish to retain the policy, will be required. Thereafter, we will transfer the policy into the individuals’ names as separately owned policies. It is important to note that this is a five-year investment after which it becomes open ended.
  • When the original policy holder dies, any remaining term of the initial five-years falls away immediately, which means that if the original policy holder dies after one week of investing, the remaining five-year term will fall away and the beneficiaries will inherit a 100% liquid investment(s), with all the tax benefits within the policy-structure.
  • Upon receipt of the death certificate of the original policy holder, we will deal directly with the beneficiary(ies). Thus, the policy is not frozen as part of the deceased estate and no executor fees are paid.

b. Alternative beneficiaries

  • The investor can also nominate alternative beneficiaries, who will only come into play should an investor and his primary beneficiary(ies) pass away at the same time or if the primary beneficiary passes away and the investor dies before replacing him or her.
  • In a way, this option serves as an alternative to an offshore trust at no additional costs. This also ensures that there is no probate.
  • Offshore trusts, testamentary trusts and freezer trusts can also be nominated as alternative beneficiaries. We do not recommend that minor children or South African trusts are nominated as they require South African Reserve Bank (SARB) approval in the event of death of the policy holder if they would like to keep the funds offshore.
  • Even though it is a Guernsey-based product, the product administration is conducted in South Africa.
  • Various model portfolio functionalities are available.
  • Various reporting tools are available, including family reporting, which can include both local and offshore investments for the family on the Ninety One Investment Platform.
  • Multiple currency online reporting (Euro, GBP, USD and ZAR).
  • Offshore family pricing is available.

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Albert Coetzee
Head of the Global Investment Platform

Important information

All information provided is product related and is not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. No one should act upon such information without appropriate professional advice after a thorough examination of a particular situation. This is not a recommendation to buy, sell or hold any particular security. Collective investment scheme funds are generally medium to long term investments and the manager, Ninety One Fund Managers SA (RF) (Pty) Ltd, gives no guarantee with respect to the capital or the return of the fund. Past performance is not necessarily a guide to future performance. The value of participatory interests (units) may go down as well as up. Funds are traded at ruling prices and can engage in borrowing and scrip lending. The fund may borrow up to 10% of its market value to bridge insufficient liquidity. A schedule of charges, fees and advisor fees is available on request from the manager which is registered under the Collective Investment Schemes Control Act. Additional advisor fees may be paid and if so, are subject to the relevant FAIS disclosure requirements. Performance shown is that of the fund and individual investor performance may differ as a result of initial fees, actual investment date, date of any subsequent reinvestment and any dividend withholding tax. There are different fee classes of units on the fund and the information presented is for the most expensive class. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Where the fund invests in the units of foreign collective investment schemes, these may levy additional charges which are included in the relevant Total Expense Ratio (TER). A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The ratio does not include transaction costs. The current TER cannot be regarded as an indication of the future TERs. Additional information on the funds may be obtained, free of charge, at The Manager, PO Box 1655, Cape Town, 8000, Tel: 0860 500 100. The scheme trustee is FirstRand Bank Limited, RMB, 3 Merchant Place, Ground Floor, Cnr. Fredman and Gwen Streets, Sandton, 2196, tel. (011) 301 6335. A feeder fund is a fund that, apart from assets in liquid form, consists solely of units in a single fund of a collective investment scheme which levies its own charges which could then result in a higher fee structure for the feeder fund. The fund is a sub-fund in the Ninety One Global Strategy Fund, 49 Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg, and is approved under the Collective Investment Schemes Control Act. Ninety One SA (Pty) Ltd is a member of the Association for Savings and Investment SA (ASISA).

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