Double Nectar Points

How much should you park offshore?

Research indicates that ideally between 20% and 40% of an individual’s investments should have offshore exposure, which will both increase growth prospects and lower risk. If you have offshore liabilities, you may prefer to invest more money offshore, as you won’t want to cover these with rand-based assets, which depreciate over time.

Alternatively, you may want your children to enjoy tertiary education abroad, so it makes sense to save in the currency where they will be studying. And if you’ve got enough funds, you could pass on a legacy for your children in a hard currency.

Individuals who have inherited or earned money overseas only need to disclose this fact; they are not required to bring it back to South Africa. As South Africa effectively has a residence-based tax system, people are taxed on their income worldwide. So if you want to leave money abroad, you have to go through the tax clearance process.

 

Retirement restrictions

Besides exchange control regulations and Regulation 28 (which sets limits to how much a retirement fund may invest in any asset class), an individual’s investment in a pension and retirement annuity fund has a 25% limit on what can be invested by the fund managers offshore.

Most people, within their pension funds, have already got the full exposure of what they are allowed in terms of offshore assets, so the only way they can extend their offshore exposure is through their discretionary savings.

 

Before taking the plunge

First, look carefully at your total investment portfolio, including your exposure to property. While you may have 25% offshore exposure in your pension fund, in terms of your total portfolio it may be far lower.

The factors people need to take into consideration are extensive,  therefore the vast majority of clients opt for flexible balanced types of funds where the fund manager will pick the region, sector and asset class and manage these towards a certain outcome. Clients also tend to be biased towards investments in developed markets, but this is bound to change when developing markets come back into favour, he adds.

 

Investment structure

The investment structure or vehicle you choose needs careful consideration as it may have important ramifications on how the assets are treated from an estate planning and tax point of view.

Besides investing in the assets (shares) directly, investors can use structures that offer a number of advantages and efficiencies from a financial planning point of view. Becoming increasingly popular are model portfolios or wrap funds where the investor selects a suitable risk profile and a professional manager then manages the underlying assets.

The implications of estate duty also need to be borne in mind when structuring an offshore portfolio. “In certain jurisdictions, estate duty applies regardless of the fact that you are not a tax resident in the country.

 

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When you take out more than one type of product included in this offer you could see your Nectar points add up even more.

• 2 new products = 3 x points
• 3 new products = 4 x points
• 4 new products = 5 x points
• 5 new products = 6 x points
• 6 new products = 7 x points

Earn your Nectar points when you shop on the high street, on the road and online. You can then treat yourself to a range of rewards from holidays to days out, shopping and cinema tickets.

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