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Living as a UK expat in South Africa, Economic benefits

20th December 2015

Living as a UK expat in South Africa comes with a lot of benefits; it brings a good quality of life, low cost of living and a warm climate.  Since British expats are not required to register with British authorities, we can only have an estimated figure of the British diaspora, but nevertheless, the South Africa government official statistics can be a reliable source of information and based on the latest figures there are 212,000 British expats living in South Africa. The British diaspora in South Africa is the 7th largest UK expat community.

The South Africa economic outlook has continued to weaken on the back of lower commodity prices and the Chinese slowdown, however, this is not just a domestic issue since the global growth outlook, including developed economies, is modestly picking up.  Despite many challenges within the South African economy, wage growth and inflation are actually picking up and on track to hit the SARB target of 6% in the first quarter of 2016. Under this circumstance and with a weak and vulnerable Rand, it made possible for SARB to be among the few central banks in the world to hike interest rate from 6% to 6.25% and it’s on track to reach 11% by the end of 2016.

Living as a UK expat in South Africa this can be a good incentive to bring all your savings under one roof as you’ll earn more on your money, compared to the UK benchmark interest rate, which is at historical low levels of only 0.5%, South Africa interest rates are at 6.25%.

The unprecedented ZAR devaluation against all of its major counterparts, including the British pound, can prove to have great advantages, at least for the British expats which have funds left in the UK. At current GBP/ZAR exchange rate of 24.1519 you can earn 30% more of your money comparing with what you would have earned last year. This can be a short window opportunity because of the USA Fed expectation to hike interest rates this week during their last policy meeting of the year, which can be the catalyst for the Rand to strengthen.

Data from the UK regulatory bodies shows that there are more than 38,000 British expats living in South Africa withdrawing a UK state pension which represent around 18% of the British expat community in South Africa. As a UK expat, you have the advantage of being able to convert your existing pension scheme into a QROPS (Qualifying Recognised Overseas Pension Scheme) which is a tremendous financial planning opportunity that is available to you as it also provide you with tax advantages. The retirement income, your current savings may generate are considered tax free by the South African tax authorities.

If you would like to reduce the amount of income tax that you pay on your pension schemes by up to 45%, which means more income in your pockets to spend as you wish for yourself and your family this can be a good investment strategy in the long-term.  At the end of the day, we all like to leave 100% of the remaining fund value to our loved ones without any liability to the UK inheritance tax.

According to the World Economic Forum’s Global Competitiveness Repor, South Africa is ranked in the 7th place as having one of the world’s most developed financial systems, based on the levels of trustworthiness, confidence and efficiency. Pension savings have become a vital component of the financial system for South Africa as it represents 87.6% of GDP. These are enough reasons and benefits to transfer your UK pension scheme into a QROPS as our retirements are far too important to be neglected.


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