A recent Financial Services Tribunal decision has exposed a major structural problem facing South Africans living abroad. Non-residents may have the legal right to cash in their South African retirement annuities before retirement, but the retirement fund controls whether you ever get the chance to put your case to South African Revenue Service (SARS).

That is not a theoretical question; it’s a real-world problem we see all the time at the Institute for International Tax and Finance. Finally, there has been some official pushback.

Barend du Plessis, a South African living abroad, spent three years fighting Discovery for his own retirement savings. When the Pension Funds Adjudicator sided with the fund, he took the matter to the Financial Services Tribunal. The Tribunal has now set aside the Pension Funds Adjudicator’s decision and sent the matter back for reconsideration.

The case has brought to light how frustrating accessing a South African retirement annuity (RA) can become once you have left the country.

Yes, You Can Access Your RA After Three Years Abroad

Under the Income Tax Act, a member of a retirement annuity fund can withdraw the full benefit – not just a third – before the age of 55 if the member has ceased to be a South African tax resident for an uninterrupted period of three years or longer.

This has been the position since 1 March 2021. So if you have genuinely ceased to be a South African tax resident with SARS and have remained non-resident for at least three uninterrupted years, you don’t necessarily have to wait until retirement age to access your retirement savings. But there is a catch. And it is a fairly big one.

You Don’t Get to Apply to SARS Yourself

Before the retirement fund can pay the benefit, a tax directive must be obtained from SARS.

The problem is that you cannot apply for that directive yourself.

In terms of the Income Tax Act, an application for a directive relating to a retirement annuity lump sum withdrawal can only be submitted by the retirement fund or its administrator. The member, the member’s attorney, or even the member’s tax practitioner cannot submit it independently.

That makes the fund the gatekeeper.

If the fund is satisfied that you have provided sufficient evidence of non-residence, it can submit the application to SARS.

If the fund isn’t satisfied, it can refuse to submit it.

And, as the Tribunal pointed out, that doesn’t merely delay the SARS enquiry. It prevents it from happening at all, because the member has no way of initiating the process independently. That’s the crux of the problem.

Who Decides Whether You Are Non-Resident?

“Non-resident” is not simply a matter of showing that you have lived outside South Africa for three years.

Your South African tax residence status involves a number of complex determinations. It is much more than counting the days you spend in South Africa.

It requires assessing whether South Africa remains your ordinary residence – your real home. Where have you established your life? Where do you return to? And does the double tax agreement with your new country apply?

Many funds reduce this complex question to a documentary checklist – foreign fiscal residency certificates, travel logs, and exit stamps. As the Tribunal observed, by doing so the fund had asked itself, “at best, half of the right question”.

Worse, in Du Plessis’s case the fund wasn’t just testing the wrong thing – it was testing for a process that no longer existed. Discovery continued to insist on proof of a South African blocked rand account. The problem is that the formal financial emigration regime that required such accounts ceased to apply for these purposes on 1 March 2021 – five years before this case reached the Tribunal. The Tribunal found that nothing in the fund’s own rules required payment into a South African or blocked rand account.

This is something we at the Institute for International Tax and Finance have seen ourselves numerous times in practice. The tax rules changed. The exchange-control rules changed. The process changed but the requirements have not been updated. And the result? Non-resident retirement savings are held hostage by an outdated checklist.

A Warning to Taxpayers Too

It would be wrong, however, to read the judgement as saying that retirement funds must simply accept whatever evidence a member gives them.

They don’t.

In fact, the Tribunal found that Du Plessis had not yet discharged the onus of proving his non-residence on the evidence before it.

He had supplied a Dutch population register extract, a Dutch passport, a Danish tax assessment, and affidavits. But he had never clearly identified which part of the South African residence definition he was relying on, nor the date on which he claimed to have ceased being a South African tax resident.

It’s the same problem Institute for International Tax and Finance sees repeatedly: a client who has lived overseas for years and no longer has their old passport showing the date they left; someone who changed countries several times along the way; someone with an inactive South African tax number who never formally applied to SARS to cease their tax residency; documentation from a foreign tax authority confirming foreign taxes paid but doesn’t meet the fund’s criteria for a formal fiscal residency certificate.

However, none of these necessarily means the person cannot access their RA even in terms of the SARS guidelines.

The Fund Is the Gatekeeper – But It Isn’t SARS

This is ultimately what makes the Tribunal’s decision so interesting. The fund is entitled to be satisfied that the member has established the requirements for the withdrawal. But the fund is not SARS, and the Tribunal drew that distinction very clearly.

The fund does not have to certify something it genuinely does not believe. But it also cannot treat its own assessment as the final word and refuse to submit the application to SARS. If the member has provided the information and documentation reasonably available to them, and has explained on oath why further evidence cannot be obtained, the Tribunal said the appropriate course is for the fund to submit the application, record its reservations, and allow SARS – the authority actually responsible for issuing the directive – to consider the evidence.

That is a significant finding. The Tribunal is effectively saying that the fund cannot hide behind an outdated checklist. They may still be the gatekeepers, but they are not the arbitrators.

Getting the Evidence Right the First Time

For South Africans living abroad, the lesson from this case is not simply “wait three years and then submit your RA withdrawal form” to access your South African retirement savings.

You still need to establish when you ceased to be a South African tax resident, why you ceased to be resident, and what evidence supports that conclusion in terms of the SARS guidelines. Ordinary residence, the physical presence test, or a double tax agreement may all be relevant.

Du Plessis’s case now goes back to the Pension Funds Adjudicator to be reconsidered, but his protracted battle with Discovery is still a warning. Getting the legal analysis and supporting evidence right the first time makes all the difference. The three-year non-resident rule for cashing out your retirement saving is relatively simple. But even after this ruling, proving that you qualify is not.

Michael Kransdorff is the CEO of the Institute for International Tax and Finance.