Making it easy for you to invest offshore

The world has changed fundamentally in the past two decades. As global citizens, we aren’t necessarily confined to a single country when it comes to work, education, leisure or, indeed, retirement.

South Africans have been increasingly comfortable with investing offshore in recent years and, seen within this broader context, it’s not surprising. Exchange controls and limits on offshore allowances have steadily relaxed, while new products and platforms have been brought to the market, making offshore exposure simple.

Benefits of offshore investing

Offshore exposure offers two obvious benefits: a much bigger investment universe and protection against currency weakness. The JSE has fewer than 500 listed companies, compared to the tens of thousands available globally. Beyond the numbers, there are sectors and markets that are simply not available on our local market. Social networking (for example, Facebook), e-commerce (for example, Amazon), motor manufacturers (for example, Tesla or Ford) or biotechnology (for example, Gilead) are just some examples.

Any offshore investment will form part of your offshore allowance. Residents have a single discretionary allowance (SDA) of R1 million a year, with a limit of up to R10 million, provided a tax clearance certificate is obtained and submitted to your financial institution.

When you invest using your offshore investment allowance, your money is exchanged to foreign currency (unless you already have funds in a foreign bank account). Regular contributions mean your conversion rates will average out over time. This means you’ll be able to ride out currency fluctuations and you won’t have a scenario where you move a large chunk of money offshore at, say, R15 to the dollar (which carries with it risks of the rand strengthening from that position).

Discovery Invest offers investors a number of offshore investment options, including new Recurring Dollar Endowment Plan. This plan enables investors to invest a minimum of $200 per month, with monthly contributions capped at $4 000. There is no clearance required because the investor’s R1 million single discretionary allowance (SDA) is used.

For those who want to make a lump-sum investment, the Offshore Flexible Investment Plan allows you to invest offshore with access to your money as needed. Discovery’s Offshore Endowment Plans also offer numerous benefits, including the Offshore Upfront Investment Integrator for qualifying investors

Investing offshore for retirement

In the context of saving for retirement, offshore investing is also a compelling proposition. It allows for true diversification. Even if your portfolio is correctly diversified, as a South African-domiciled investor you’re likely locked into funds and annuities that are rand-based. This carries with it an inherent element of risk. Ensuring that you have a retirement investment offshore in another hard currency (likely dollars) will diversify you further.

The Dollar Discovery Retirement Optimiser is an endowment plan that allows holders of a Discovery Dollar Life Plan to save for retirement in US dollars. This plan offers discounts on your annual fees and adds an extra amount to your investment when you turn 65 (subject to conditions).

For more information on investing for retirement, speak to your financial adviser.

This article is part of an investment series by Discovery Invest.

The Offshore Endowment Plans and the Dollar Discovery Retirement Optimiser are issued by Discovery Life International, the Guernsey branch of Discovery Life Limited (South Africa). Discovery Life International is licensed by the Guernsey Financial Services Commission, under the Insurance Business (Bailiwick of Guernsey) Law 2002, to carry on long-term insurance business. The South African Long-term Insurance Act of 1998 also applies to the Offshore Endowment Plans and Dollar Discovery Retirement optimiser. Discovery Life is a registered long-term insurer and an authorised financial services provider, registration number 1966/003901/06. The Offshore Endowment Plans, and the Dollar Discovery Retirement Optimiser are administered by Discovery Life Investment Services (Pty) Limited trading as Discovery Invest, a subsidiary of Discovery Limited. Discovery Invest is an authorised financial services provider. The trustee appointed by the Branch must hold the licensed insurer’s assets representing at least 90% of planholder liabilities in trust. This is a standard condition on the license of the Insurer under section 12 of the Insurance Business (Bailiwick of Guernsey) Law, 2002 (as amended). The information given in this document is based on our understanding of current law and practice in South Africa and Guernsey. We do not accept responsibility for the effect of any future legislative or regulatory changes.