Case Study: International Pension Plans - A flexible alternative for South African residents

April 26, 2022


While South African residents have a choice of domestic retirement savings vehicles, including pension funds, provident funds and retirement annuity funds, these are subject to a maximum annual tax-deductible contribution limit across all such arrangements of 27.5 per cent of qualifying earnings or 350,000 ZAR (whichever is the lower). This annual contribution limit can make it challenging for higher earners to accumulate sufficient funds within their South African retirement savings vehicles to maintain their lifestyle post retirement.

IPPs are pension schemes established in jurisdictions which are not the home country of the individual pension scheme member. In the case where domestic annual contribution limits prove restrictive, an IPP can enable additional contributions to be made to a separate overseas retirement savings plan in order to accumulate sufficient savings.

In the fictional case study below, we explore how an Isle of Man IPP can be utilised by a South African resident individual who has met his domestic annual contribution limit.


Norman (45) is a high earner, currently contributing the maximum allowable to his South African retirement annuity fund. Norman intends to retire at 65 and has calculated he will require approx. 1,200,000 ZAR gross income per year (in today’s terms) to maintain his lifestyle, travel as he wishes and help fund his grandchildren’s education in retirement.

Assuming Norman’s South African retirement annuity fund keeps pace with inflation, and he continues to make maximum contributions, it is anticipated that his retirement fund at age 65 should generate an estimated income of circa 325,000 ZAR gross per year (in today’s terms). This equates to a shortfall of 875,000 ZAR gross per year on his target retirement income.


Norman meets with his adviser to discuss options to use some of his excess disposable income to save toward his target retirement income. Having agreed future inflation expectations and likely investment return with his adviser, Norman approaches Boal & Co actuaries to calculate the additional average annual contributions required over the next 20 years to achieve the target income of 1,200,000 ZAR gross per year at retirement.

Boal & Co actuaries calculate circa 690,000 ZAR* of additional annual contributions (in today’s terms) is required to fund the additional 875,000 ZAR gross per annum in retirement, using the assumptions provided by the adviser.


As Norman is already contributing the maximum annual limit into his existing South African retirement annuity fund, he decides to establish an IPP and make annual contributions of 690,000 ZAR increasing with inflation. He meets with his adviser annually to monitor the performance against the assumptions and make any adjustments required.

Norman elects to make the required level of annual contribution in USD so that his IPP fund is denominated and invested in a stable currency. At retirement, Norman intends to seek independent tax advice to determine the most appropriate means and frequency of benefit withdrawal (i.e. lump sum, regular pension income, or a combination) depending on his personal circumstances at that time.

Isle of Man IPPs

As a leading jurisdiction for pension trustee and administration services, the Isle of Man boasts a robust but flexible framework for international pensions with the Retirement Benefits Schemes Act 2000 and secondary legislation providing regulation at both pension product and provider level for more than 20 years.

A South African resident has been used in this example. However, Isle of Man IPPs can be appropriate for a range of (non-Isle of Man resident) individuals. The benefits of IPPs established in the Isle of Man extend far beyond simply offering an alternative pension solution to individuals unable to fund a scheme or restricted by annual contribution limits in their country of residence. Further benefits include:

  • The option to denominate the fund in a stable currency to mitigate against exchange rate volatility of home currency
  • Access to a wider range of investment opportunities
  • International portability
  • Flexible benefit payment options to suit retirement objectives, paid gross at source
  • The ability to nominate discretionary beneficiaries for the residual fund on death   
  • Cost competitive

We will explore some of the other features of IPPs for individuals in future case studies.

For further information on Isle of Man IPPs for individuals, resident in South Africa, or elsewhere, contact Mark Doyle.

*The assumptions used for this example are a life expectancy of 85, 3.5% pa inflation, 6% pa investment return and a 1% pa expense allowance (to make provision for pension product, underlying investment and advice charges)
Case Study Notes:
While contributions into the IPP will not qualify for any tax relief, they will not be subject to South African donations tax, and any income/gains from investment of the contributions will roll up gross within the IPP.  There are no upper caps on the annual amount of contributions that can be made into an IPP but individuals should be aware of any restrictions in their country of residence (e.g. a South African tax resident should keep in mind their foreign investment allowance in addition to the respective exchange control considerations).
Benefits payable from the IPP in the future will be payable gross at source from the Isle of Man, with the tax position upon receipt in South Africa dependent upon the element of the fund from which the benefits are paid (i.e. capital or growth) and the nature in which the benefit payments are made.
Tax rules can change. The value of an investment is not guaranteed and can go up as well as down depending on investment performance. You could get back less than you invested. This example is for illustrative purposes only. You should review your needs with a financial adviser before investing.