Today people change jobs by as much as 10 to 15 times over their working lives, according to statistics from the United States. Trends in South Africa are similar, with people tending to change jobs much more often than they did in previous generations.
When you change jobs, one of the most important financial responsibilities you have is to make sure you preserve any benefits you have saved to date.
As different companies have different policies in pension contributions, when you sign on with a new employer, you need to understand what new benefits the new employer is offering. As an example, your old employer might have put 15% of your salary into a pension but your new employer might put much less and this will have a significant effect on your retirement expectations and outcome, meaning you will have to make additional contributions. This applies to your retirement savings and any other benefits – from life cover to disability cover – and you need to ensure you are appropriately covered for any eventuality.
“It is important that you don’t eat into anything you have accumulated to date and to make sure you are still sticking to your original plan. As more people become mobile in terms employment they may even work in different countries. They need to keep their retirement goal top of mind.”
People changing jobs may be tempted to take the cash portion of their retirement savings and keep the rest for retirement.
Mark Lapedus, Divisional Director: Proposition Enablement, Liberty Innovation says it is important to preserve your benefit and not to be tempted to take the cash. There are different options available on how to preserve and you should get advice to determine which is best for each persons circumstances.
If you are part of a large company and leave, you have the option of a preservation fund, which will keep your retirement savings until retirement or you could move the money to your new company fund or a retirement annuity.
Generally, there is not much difference between them, as you will still keep the tax benefits and let your money grow until retirement tax free. There could, however, be some cost and accessibility differences and you would need to look at which is best for you.
“Some options are more costly that others. Make sure you are getting good value for money”, Lapedus says.
The most important requirement when changing jobs is discipline. “Having discipline to stick to the plan is paramount. Don’t be tempted by seeing the lump sum and thinking you could go on a nice holiday or buy a new car. These funds are for your retirement, for a time when you wont be working and will need the money to live.”
This article was sponsored by Liberty.