Offshore Allocation in Your Retirement Portfolio: How Much Is Right in 2026?
The rand has lost roughly half its value against the US dollar over the past decade. The JSE represents less than 0.4% of global market capitalisation. And South Africa's political and economic risks are real. Yet many South Africans still have retirement portfolios that are 90% or more rand-denominated.
Getting your offshore allocation right inside a retirement annuity is one of the highest-leverage decisions in long-term retirement planning. Too little, and you're carrying concentration risk in one of the world's more volatile economies. Too much, and you're exposed to rand strengthening during drawdown when your spending is in rands.
Here's how to think through the decision in 2026.
The Legal Limit: What Regulation 28 Allows
Regulation 28 of the Pension Funds Act governs how South African pension funds, provident funds, preservation funds, and retirement annuities can invest. The key offshore limits are:
Maximum offshore allocation under Regulation 28 (2026):
- Up to 45% in global (non-African) assets
- Up to an additional 10% in rest of Africa assets
- Combined maximum: 45% (the 10% Africa sub-limit sits within the 45%, not on top of it)
This limit was increased from 30% to 45% in February 2022 — a significant change that gave South African retirement savers much greater access to global markets. Many balanced fund managers moved quickly to increase their offshore allocations following the change.
Tax-free savings accounts (TFSAs) are not pension funds and are not subject to Regulation 28, so they can hold 100% offshore via ETFs or unit trusts.
Why Offshore Exposure Matters in a South African Retirement Portfolio
There are three primary arguments for meaningful offshore allocation in a retirement portfolio:
1. Rand Depreciation Over Time
The rand has averaged roughly 6–8% depreciation against the US dollar per year over the past 20 years. A retirement portfolio with 0% offshore allocation has to generate enough real return in rands to cover both inflation and this ongoing purchasing power erosion against hard currencies. Offshore exposure doesn't eliminate that risk, but it partially offsets it.
2. Global Diversification
The JSE is heavily concentrated in mining (commodities), financial services, and consumer goods — sectors correlated to SA's commodity-export economy. Global equity markets give exposure to technology, healthcare, consumer discretionary, and other sectors largely absent from the JSE's top 40. Diversification across geographies and sectors reduces single-economy risk.
3. Global Growth Access
Long-run US equity markets have returned approximately 10% per year in dollar terms over the past century. SA equity markets have delivered comparable nominal rand returns but with significantly more volatility and some catastrophic drawdowns. For investors with 20–30-year horizons, global equity exposure compounds meaningfully.
The Counter-Argument: You Retire in Rands
The case for higher offshore allocation is strong for the accumulation phase. But there's a critical counterpoint for the drawdown phase.
If you retire in South Africa, your primary expenses — housing costs, medical aid premiums, food, utilities — are all rand-denominated. If you have R3 million invested in a dollar-denominated fund and the rand strengthens 20% in the year you start drawing, your rand income from that portfolio drops by 20% in a single year.
The drawdown mismatch risk: A high offshore allocation in retirement creates sequence-of-returns risk tied to currency moves. If the rand strengthens during your early retirement years — when the largest drawdown damage occurs — offshore returns in rand terms suffer. The solution is not to eliminate offshore exposure but to think about your spending currency and timeline.
The Right Offshore Allocation by Life Stage
| Life stage | Suggested offshore range | Rationale |
|---|---|---|
| Under 35 (early accumulation) | 35–45% | Maximum time to benefit from global growth and currency diversification. Can absorb rand/offshore volatility over a 30+ year horizon. |
| 35–50 (mid-career) | 30–45% | Maintain meaningful global exposure. Consider whether retirement will be in SA or abroad — affects the right currency mix. |
| 50–60 (pre-retirement) | 25–40% | Begin evaluating spending currency. If retiring in SA on rands, start tilting back toward rand-denominated assets. If planning to emigrate, maintain or increase offshore exposure. |
| 60+ (at or in retirement) | 20–35% | Balance rand-income stability for expenses with inflation and rand-depreciation protection over a 20–30 year retirement horizon. Full de-risking into rands carries its own long-term inflation risk. |
These are general frameworks, not rules. The right number for you depends on your specific situation: health, dependants, debt, property ownership, emigration plans, and risk tolerance all shift the equation.
How to Get Offshore Exposure Inside an RA
There are three main ways to add offshore exposure inside a South African retirement annuity:
1. Balanced Funds (Most Common)
Most South Africans with an RA are in a balanced fund — a multi-asset fund that blends SA equity, SA bonds, SA property, and a global allocation. After the 2022 Regulation 28 change, most reputable balanced funds now run at 30–45% offshore. Check your fund's current offshore allocation in its quarterly factsheet or on the platform dashboard.
2. Feeder Funds
A feeder fund is a rand-denominated unit trust that invests directly into a foreign fund — typically a global equity index fund tracking the MSCI World, S&P 500, or MSCI All Country World Index. You own rand units; the underlying assets are priced in dollars or euros. Most major RA platforms (Sygnia, 10X, Allan Gray, Satrix, Ninety One) offer one or more global feeder funds.
3. Direct Offshore ETFs via TFSA
While Regulation 28 limits offshore exposure in RAs and pension funds to 45%, your tax-free savings account has no such restriction. You can invest your full annual TFSA contribution (R36,000 per year, R500,000 lifetime) in a 100% global equity ETF. Many South Africans use TFSAs to deliberately skew their overall retirement portfolio further offshore than the RA rules allow.
Portfolio example: RA at 40% offshore + TFSA at 100% global ETF. If the RA is R2 million and the TFSA is R500,000, the combined portfolio has (R800,000 + R500,000) / R2,500,000 = 52% effective offshore exposure — well above the RA limit in isolation.
Rand Hedging vs. True Offshore Diversification
Not all "offshore exposure" in an RA is equal. Two important distinctions:
JSE-listed rand hedges are South African companies that earn most of their revenue in foreign currencies — Naspers/Prosus (tech), Anglo American (mining), Richemont (luxury goods), AB InBev. These are Regulation 28-compliant local assets, not classified as offshore, but they provide partial currency diversification.
Feeder funds and direct offshore allocations give you true exposure to global markets and full rand/currency diversification. A 40% JSE rand-hedge allocation and a 40% offshore feeder fund allocation are very different risk profiles, even though they may feel similar.
When evaluating your retirement portfolio's offshore allocation, check whether the offshore percentage includes only genuinely foreign-domiciled assets or whether it blends in JSE-listed rand hedges.
The Low-Fee Advantage Offshore
One underappreciated benefit of accessing global equity through passive index feeder funds inside an RA is the fee differential. A passive global equity ETF typically charges 0.10–0.20% per year. Actively managed SA equity funds charge 0.80–1.5%. Over 30 years, that fee difference compounds into a meaningful difference in retirement capital.
Sygnia, 10X, and Satrix all offer low-cost global index options within their RA platforms. If your current RA is in a high-fee balanced fund with limited offshore exposure, a platform switch and portfolio restructure is worth modelling before assuming the current structure is optimal.
Practical Steps to Review Your Current Offshore Allocation
- Log into your RA platform and pull your current portfolio breakdown
- Find the offshore or global allocation percentage — it should be in the latest quarterly fund factsheet
- Compare it to the Regulation 28 maximum of 45%. If your fund is only at 20–25%, consider whether that reflects a deliberate choice or a legacy allocation before the 2022 rule change
- Check your total retirement portfolio across RA, pension/provident fund, TFSA, and discretionary investments. Calculate your blended offshore percentage across all of them
- Model the fee impact — if you're in an actively managed balanced fund charging over 1%, compare the offshore allocation and total cost to a passive alternative
Calculate your retirement number
See how much capital you need based on your monthly income target — and whether your current savings rate gets you there.
Use the Retirement Calculator →What the Smart Money Is Doing
South African institutional investors — pension fund managers, endowments, and sophisticated family offices — generally run their global allocation at or near the Regulation 28 maximum of 45%. They do this because the long-run case for global diversification is strong, the rand's structural weakness is persistent, and the SA market is too small and concentrated to carry a whole retirement portfolio.
Retail RA investors, by contrast, often default to whatever balanced fund was pre-selected when they set up their RA years ago — frequently a fund running at 25–30% offshore, set up before the 2022 Regulation 28 change.
Reviewing your offshore allocation is one of the simplest, most impactful portfolio improvements available to most South African retirement savers in 2026. It costs nothing to switch portfolios within the same RA platform, and the fee and allocation review can meaningfully improve your projected retirement outcome.
Frequently Asked Questions
What is the maximum offshore allocation allowed in a South African retirement annuity?
Under Regulation 28, South African pension funds and retirement annuities can invest up to 45% offshore. This limit was increased from 30% to 45% in 2022.
Should I put my retirement annuity in an offshore fund?
Some offshore exposure is broadly recommended for South African retirement portfolios. The right proportion depends on your age, where you plan to retire, and your overall portfolio composition. Younger investors generally benefit from allocations closer to 40–45%. Investors already in retirement and spending primarily in rands may reduce offshore exposure to manage currency risk during drawdown.
What is a feeder fund in a South African retirement annuity?
A feeder fund is a rand-denominated fund that invests into a foreign fund, giving you offshore market and currency exposure while remaining within Regulation 28 limits. Most SA RA platforms offer feeder funds tracking global indices like the MSCI World.
Does offshore exposure inside an RA protect me from rand depreciation?
Partially, yes. When the rand weakens, the rand value of your offshore allocation rises. But if your retirement spending is in rands, very high offshore exposure creates volatility risk if the rand strengthens significantly during your drawdown years. A balanced approach — meaningful offshore exposure without going to 100% — manages both risks.
This article is for general information purposes only and does not constitute financial or investment advice. Portfolio allocation decisions should consider your full financial picture, risk tolerance, and objectives. Consult a qualified financial adviser for personalised guidance.