Changing jobs is a significant step, and while you’re focused on your new role, it’s crucial not to overlook what happens to your retirement savings held in your previous employer’s pension fund. At Pakfin, we understand that navigating this process can seem daunting, and we’re here to guide you through it.

Understanding Your Options

When you leave an employer, you generally have a few options for your pension fund:

• Leave it in the fund: While possible, this might not always be the most beneficial option, especially if you want more control over your investment or prefer to consolidate your retirement savings.
• Take a cash lump sum: This might seem tempting, but it’s usually not advisable as it can lead to significant tax implications and reduce your retirement savings.
• Transfer it to a preservation fund: This is often a smart choice. A preservation fund is specifically designed to hold your retirement savings until you retire. It allows your money to continue growing tax-efficiently.
• Transfer it to your new employer’s pension fund: If your new employer has a pension fund, you might be able to transfer your previous fund into it.
• Transfer it to a retirement annuity: This is another way to preserve your retirement savings and offers flexibility in terms of investment choices.

Why Consider Transferring?

There are several compelling reasons to consider transferring your employer’s pension fund:

• Preservation of Capital: Transferring to a preservation fund or another retirement vehicle ensures your savings continue to grow and benefit from potential investment returns. As Investec highlights, this allows you to “preserve your retirement capital, as well as the tax benefits you have accumulated” Preservation fund | Investec.
• Consolidation: Transferring multiple pension funds into one place can simplify the management of your retirement savings.
• Investment Control: Depending on the chosen vehicle, you might have more control over how your money is invested.
• Tax Efficiency: Funds within preservation funds and other retirement vehicles continue to grow without immediate tax implications. Old Mutual confirms that you generally pay no tax on transferring to a Preservation Fund, nor on the growth of your investment Preserve your pension or provident funds – Old Mutual.

The Transfer Process

While the exact process might vary slightly depending on the funds involved, here are the general steps:

1. Inform your previous employer: Let them know you wish to transfer your pension fund. They will provide you with the necessary forms and information about your fund value.
2. Choose your transfer destination: Decide whether you want to transfer to a preservation fund, your new employer’s fund, or a retirement annuity.
3. Complete the necessary paperwork: You’ll likely need to fill out forms from both your previous employer’s fund and the new fund you’re transferring to.
4. Submit the forms: Send the completed forms to the relevant institutions.
5. The transfer takes place: Once all the paperwork is in order, the funds will be transferred directly between the institutions.

Important Considerations

• Fees: Be aware of any potential fees associated with transferring your funds.
• Investment Options: Understand the investment options available in the new fund and ensure they align with your risk tolerance and retirement goals.
• Withdrawals: Keep in mind that accessing funds in a preservation fund before age 55 is generally restricted and may have tax implications. However, Old Mutual notes that you can typically make one full or partial withdrawal before retirement, although this will be taxed Preserve your pension or provident funds – Old Mutual.
• Two-Pot Retirement System: As Absa explains, starting from 1 September 2024, a new “Two-Pot” system will be implemented. This system will split future retirement contributions into a savings pot (accessible once a year) and a retirement pot (accessible at retirement). Importantly, existing retirement savings until 31 August 2024 will be placed in a “vested pot,” which can be accessed when you change employers Two-Pot Retirement System explained – Absa. This upcoming change will offer more flexibility in accessing a portion of your retirement savings when changing jobs.

How Pakfin Can Help

Navigating the complexities of pension fund transfers can be overwhelming. At Pakfin, our experienced advisors can provide you with personalized guidance to help you make the best decision for your financial future. We can assist you with:

• Understanding your options and the implications of each.
• Completing the necessary paperwork.
• Choosing the right preservation fund or retirement annuity based on your individual needs.
• Ensuring a smooth and efficient transfer process.

Don’t leave your hard-earned retirement savings to chance. Contact Pakfin today for expert advice and support in transferring your employer’s pension fund. Let us help you secure your financial future