What to do with Provident fund when changing jobs?

[deekay]

I am changing jobs at the end of this month but have provident fund contributions with my current employer. The firm that I will be joining next month also have a compulsory provident fund. Can I and should I transfer the funds from the one provident fund to the other or transfer the funds to a Retirement Annuity that I also have going separately.

My financial advisory says it's a bad idea to put in the companies provident fund I can't see why though? I'm worried he may want me to put in the RA so that gets him more commission? What's the better option?

[Terata1]

RSA retails bonds

[deweyzeph]

Tell your new employer that it's none of their business what you do with your money and that they can't force you to do anything. If they insist on you contributing to their fund then find a new employer. It's extremely unethical for a company to force you to contribute to a fund whether it's a retirement annuity or a provident fund or a pension. It's your money, don't forget that.

[Ice2Cool]

I am changing jobs at the end of this month but have provident fund contributions with my current employer. The firm that I will be joining next month also have a compulsory provident fund. Can I and should I transfer the funds from the one provident fund to the other or transfer the funds to a Retirement Annuity that I also have going separately.

My financial advisory says it's a bad idea to put in the companies provident fund I can't see why though? I'm worried he may want me to put in the RA so that gets him more commission? What's the better option?

Are you taxed for moving from a Provident fund to a RA? In any case its much of a muchness I feel. You can transfer the money directly to your new employers provident fund as if you withdraw it as cash you will get taxed heavily. If there is a gap between employment you can put it in a holding fund to keep you from having to withdraw it as cash.

[Venomous]

Tell your new employer that it's none of their business what you do with your money and that they can't force you to do anything. If they insist on you contributing to their fund then find a new employer. It's extremely unethical for a company to force you to contribute to a fund whether it's a retirement annuity or a provident fund or a pension. It's your money, don't forget that.
What will you live off one day when you can no longer work?

[creeper]

If you pay out the provident fund, you are going to pay tax on it. To me, that is a waste as you can rather move your current provident fund onto your new company without paying tax I think it is called chapter 14 transfer.

Let's say you have 100000 in the provident fund, you pay it out and pay 35% tax. R35000 doesn't sound like much, but calculate 6% or 10% interest on R35000 for 20 years, it comes to a nice amount. Do you really want the tax man have money that you can keep and get interest on?

Think long term, not short term.

[deekay]

Thanks guys. It definately would not be wise to cash it in due to the tax and having to 'make up' lost retirement savings.

The only question remains then should I transfer it to my new company's PF or to an RA?
I suppose the tax benefits of the RA would be a nice incentive? Any other ideas.

[sgs]

Never cash in - you'll just make the tax-man happy. Tax wise it makes no diff (afaik) if its moved to a RA, another provident fund or to a preservation fund - it shouldn't be taxed unless you withdraw it. (There might be tax implications on the eventual retirement withdrawal though - not sure.)

I'd put it where you have the most control and the lowest fees. Pick one that allows you to "move" money between various underlying funds (most financial institutions have a platform such as this). Your new employers fund might be a good one too - makes things slightly easier.

But most importantly, get advice from an advisor as to the best strategy for you personally. If you don't trust your current advisor, get another independent advisor (not affiliated with an institution) and pay him for an hour or 2 of his time so that he has your interests at heart rather than his pocket.

[Billy]

Transfer to an RA but do it yourself without the commission of the middleman. Check out Allan Gray www.allangray.co.za. I wish that I had done this instead of "donating" to an advisor for years with Liberty.

[Ol' Mean Bastid]

you can put it in a preservation fund rather than an RA, I've done it twice through Old Mutual and have had very good returns, this also allows you to take a portion of it as cash should you need it at any time, although you are restricted in terms of the % you can withdraw

[Bronzed_Skarab]

Wish people would stop asking for financial advice on these forums. You don't trust your advisor but will listen to random people on a forum? Some good and bad advice mixed in above.

Firstly, get an advisor who charges a fee for advice, and not commission. At least that way there are no funny incentives to worry about.

RSA Retail Bonds? Are you insane? What a bad idea. This is entirely the wrong investment for anyone under 75 and I'm guessing you're in your late 20s? No no no no no.

Transferring to an RA or the companies Provident Fund or a separate Preservation Fund are all options. "New style" RAs have no or very limited surrender penalties. Go with one that has no upfront costs and no penalties on withdrawal or transfer. (The tax is a separate issue, but make sure the provider isn't going to charge you.) Check out Allan Gray and Coronation if you want access to their investment expertise and an RA. The insurers do have some good products as well, but watch our for fees.

Transferring to the new employer's Provident Fund is a good option because it simplifies your life. This will be (almost certainly) a Defined Contribution Fund so it's your money, separately ring-fenced. Having all your retirement savings together makes admin easier.

A preservation fund is another option, but it might work out more expensive and will certainly complicate your retirement planning having separate pools of money in separate places. If you are quite young (under 30) then it will be a relatively small amount of money to have on its own.

[Terrabiticfossilite]

Wish people would stop asking for financial advice on these forums. You don't trust your advisor but will listen to random people on a forum? Why offer advice then?

The point is to be more informed and make up your own mind. We have learned in SA not to take one financial advisor's word for anything, no matter how the industry has cleaned up recently. What he wants is some ideas to allow him to make up his own mind. Most people can sift through the good and the bad in a forum like this. If nothing else, he at least has something to go back to his financial advisor with.

The nature of an active forum is such that you will have people from all spheres, including professionals, who love to be heard. It's almost certain someone with good knowlege will come in and make their opinion known (and their credentials to some extent).

[griffinbradley]

the rules for pension contributions has changed and will be implemented from march 2012. you are only able to access your funds when you retire a 60. say thanks to the government.

[deweyzeph]

What will you live off one day when you can no longer work?

My point is that it's up to you where to invest for your retirement, not for your employer to tell you.

[Celine]

bronzed - your attitude is unwelcome on this forum. just remember there are members who have been through a lot of things in life and are well informed in a lot of areas and can give some advise so perhaps you should rethink your statement.

now getting back to the issue on hand.

if you transfer from a provident to provident fund it will be tax free.

if you transfer from provident to RAF it will be tax free.

if you transfer from provident to preservation fund it will be tax free.

so you can decide what it is you will want to do. taking into account that you can take out the first 22 500, that is the tax free portion.

[Terrabiticfossilite]

About the tax free thing.... what if you have a heck of an investment opportunity? You still pay tax on it when you retire, just less (or umm... one would hope that is the case by the time you retire). BUT... if you have an investment opportunity today that has a decent return, it would make sense to pay tax up front and invest the lump sum now, depending on the amount etc. Of course, you still pay tax on your income from your investment when you retire, but if the investment is good enough, it might be better to not miss the opportunity.

Having said that, don't let that be an excuse to be tempted to blow it.

[zamedic]

Back on track...

I am in the same situation as you, I also switch jobs and have these pension fund things to take care off. The one thing I can personally recommend is to talk to a financial advisor about your options.

Me, I have a preservation fund set up, when ever my tenure at a job is finished I simply ask the company to move the funds into the preservation fund .

[Bronzed_Skarab]

No offense meant, and the reason I put in my R0.02 is because I do want to help. If someone is asking for advice, I'd rather try to give good advice than stay silent. However, I disagree that it's easy to tell the good advice from the bad. There are people who are informed, but there are also horribly misinformed and will give their advice without knowing that it is bad. I stand by my statement, trying to get advice on a specialised area like this where far more people have opinions than have solid background is a bad idea.

One person's particular experiences may not be relevant to another's. Thinking that things that are similar are the same and ignoring the differences is a bad idea. The simple reality is that without knowing the poster's particular circumstances and plans and ideas and hopes and dreams, we can't give the best advice (and that most certainly goes for me too).

My "attitude" is one of warning against getting advice that might be misleading (of which there were examples on this thread and are almost always examples on threads of this nature) and then attempting to help as well. I think you're being a little unkind to say "my attitude is unwlecome".

[Terrabiticfossilite]

No offense meant, and the reason I put in my R0.02 is because I do want to help. If someone is asking for advice, I'd rather try to give good advice than stay silent. However, I disagree that it's easy to tell the good advice from the bad. There are people who are informed, but there are also horribly misinformed and will give their advice without knowing that it is bad. I stand by my statement, trying to get advice on a specialised area like this where far more people have opinions than have solid background is a bad idea.

One person's particular experiences may not be relevant to another's. Thinking that things that are similar are the same and ignoring the differences is a bad idea. The simple reality is that without knowing the poster's particular circumstances and plans and ideas and hopes and dreams, we can't give the best advice (and that most certainly goes for me too).

My "attitude" is one of warning against getting advice that might be misleading (of which there were examples on this thread and are almost always examples on threads of this nature) and then attempting to help as well. I think you're being a little unkind to say "my attitude is unwlecome".

So the next q is... should people use forums for advice of any sort then? Should we give up asking people their opinions because they don't make money from them 9-5?
What would the worst advice offered in this thread be in your opinon?

[Bronzed_Skarab]

So the next q is... should people use forums for advice of any sort then? Should we give up asking people their opinions because they don't make money from them 9-5?
What would the worst advice offered in this thread be in your opinon?

"RSA Retail bonds"

And of course I don't think one shouldn't seek advice in a forum. How was the service from that service provider? What were your experiences with LG Fridges, do you know a good lawyer, what size tyres fit my chico. Those are all issues where the problem is tangible and at hand and the practical experience of one person is directly relevant and interpretable by another.

Asking "where should I invest my money" is different. It is not possible to give a great answer without far more information, it is a fundamentally important question, it's actually illegal (FAIS) to give advice unless accredited and almost everyone has a view and it's hard to tell what's good and bad unless you already know about it. "My DNS323 NAS failed after 2 months" is factual and informative. It doesn't mean all DNS323 NASs will fail, but one knows how to understand that and interpret it. The financial markets are not repeatable experiments so "I invested in Satrix last year and I made 12%" isn't useful information for deciding whether or not to invest in Satrix. Many people think that their particular experiences are relevant to everyone else. In many cases this is absolutely true. In others, it's not.

In hindsight, sure, I should have used more polite language and I truly didn't mean any offence. My opinion is still that it is dangerous to seek this sort of advice on a forum. A bit like finding dates on Craigslist.