Plan that pension properly
Sathu said that as many people were likely to change jobs during their working life, they must consider the financial implications that come with this, especially long-term plans such as retirement planning.
“People change jobs for a number of reasons and in most cases, when the move takes place, it has some implications on their finances. Some of the common reasons for changing jobs are career development, growth, better salary and benefits or relocation. Changing jobs is more likely to have a direct impact on the individual’s finances as they may be getting a better salary compared to the previous job, spending more or less on transport, for example,” he said.
Sathu has unpacked three scenarios that people may be faced with when changing jobs:
- The company doesn’t offer retirement benefits: if you are leaving your current company that offers retirement benefits for a company that doesn’t offer retirement benefits, it is advisable to continue with your current retirement contributions so that you stay on track in reaching your retirement goals.
- The company offers retirement benefits: even if the new company offers retirement benefits, you need to ensure that you make adequate contributions which will ensure that you retire comfortably. Moreover, avoid putting all your eggs in one basket. Having your own retirement plan in addition to the one offered by your employer will benefit you in the long-term.
- They offer different retirement funds: for example, if you are moving from a company that offers a retirement annuity to a company that offers a provident fund, it would be worthwhile to continue with the retirement annuity in your personal capacity. This will help strengthen your retirement benefits which will help you benefit immensely over the long term.
Meanwhile, Jaco Pretorius, chief executive of Ensimini Financial Services, said amendments to the Pensions Fund Act, announced earlier this year, were a step in the right direction.
“While it has been easy for the retirement savings industry to blame consumer apathy for poor consumer decisions, it is often more likely the result of a lack of access to relevant and unbiased information,” said Pretorius.
The amendments stipulated that funds are required to ensure that members have access to retirement benefits counselling before they make any decisions and no money can be transferred or withdrawn unless this has been done.
“Far too many members of retirement funds do not fully understand the long-term implications of the options available to them. Statistics reflect that a staggering 97percent of members that withdraw prior to retirement elect to take their accumulated benefit as a lump sum without fully appreciating the long-term impact on their retirement,” said Pretorius.
He added that in many instances this behaviour is a function of the individual’s economic circumstances, but is often a result of a lack of access to appropriate counselling.