Leaving your funds in retirement fund after resignation is a very bad idea

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terencej

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Background :
I worked for a company for 2 years and we had a compulsory Funds at work fund with Momentum. about 5 months ago I resigned and joined a new company with a new pension fund. I decided to leave my retirement fund in tact so it can grow. (Worth R94k at the time of resignation).

The Shock :
Today I checked the balance of that fund just to realize it lost R6600 in 5 months.
Now, do not get me wrong, I understand that equity drops and rises. But I looked at the statement and saw the following happening over the last 5 months.

30 Sep 2017
575.758841 units at a price of 163.552261 = R94116.66
15 Feb 2018
573.523071 units at a price of 152.054778 = R87206.92

This is a drop of R6909.74

In 5 (almost) months this fund dropped by and avg of R1382 p/m.

But then I realized, equity drops and rises over time. So I can understand the value drop.

What actually shocked me was the drop in units. 2.23577 units lost to fees. So not only is the fund performing very badly, they are also eating up the rest of it in fees
I asked HR at my old company as well as a so called "financial advisor" telephonically at Momentum about 4 months ago if this would happen and they assured me that the growth would be way more than the "tiny" fees they charge.

Conclusion :
If you resign, do not leave your funds with your ex employers fund(in my case it was Momentum funds at work). It will just be eaten up by fees. TRANSFER YOUR FUNDS TO YOUR NEW EMPLOYERS FUND AS SOON AS POSSIBLE.

Today I am setting in motion the transfer of my previous employers fund to my new one.
 

Sly21C

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Buy bitcoin, forget about it until you retire.
 
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supersunbird

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Background :
I worked for a company for 2 years and we had a compulsory Funds at work fund with Momentum. about 5 months ago I resigned and joined a new company with a new pension fund. I decided to leave my retirement fund in tact so it can grow. (Worth R94k at the time of resignation).

The Shock :
Today I checked the balance of that fund just to realize it lost R6600 in 5 months.
Now, do not get me wrong, I understand that equity drops and rises. But I looked at the statement and saw the following happening over the last 5 months.

30 Sep 2017
575.758841 units at a price of 163.552261 = R94116.66
15 Feb 2018
573.523071 units at a price of 152.054778 = R87206.92

This is a drop of R6909.74

In 5 (almost) months this fund dropped by and avg of R1382 p/m.

But then I realized, equity drops and rises over time. So I can understand the value drop.

What actually shocked me was the drop in units. 2.23577 units lost to fees. So not only is the fund performing very badly, they are also eating up the rest of it in fees
I asked HR at my old company as well as a so called "financial advisor" telephonically at Momentum about 4 months ago if this would happen and they assured me that the growth would be way more than the "tiny" fees they charge.

Conclusion :
If you resign, do not leave your funds with your ex employers fund(in my case it was Momentum funds at work). It will just be eaten up by fees. TRANSFER YOUR FUNDS TO YOUR NEW EMPLOYERS FUND AS SOON AS POSSIBLE.

Today I am setting in motion the transfer of my previous employers fund to my new one.
So much is not correct with your post, they were eating your funds all along, your contributions just hid it. Nothing wrong with keeping it there in and off itself, but I would have moved it to an RA. If I keep my 10X work fund with my employer if I leave them, it will not suddenly do badly.
 

terencej

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So much is not correct with your post, they were eating your funds all along, your contributions just hid it. Nothing wrong with keeping it there in and off itself, but I would have moved it to an RA. If I keep my 10X work fund with my employer if I leave them, it will not suddenly do badly.
True. I never realised how bad these funds are at preserving money. Instead they just eat at it with their fees.
And yes, over a long enough timeline the fund would kill itself off via fees.
 

deweyzeph

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Or alternatively stop working for employers who force you to invest their funds. This practice should be outlawed.
 

SauRoNZA

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The problem doesn't seem related at all to the your thread title (leaving it in the old employers funds) but rather just leaving it in a crappy fund in the first place.

I wouldn't have moved it to my new employers fund and rather separated it completely and done my own thing where I have full control.
 

SauRoNZA

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True. I never realised how bad these funds are at preserving money. Instead they just eat at it with their fees.
And yes, over a long enough timeline the fund would kill itself off via fees.
Do you know what fund your new employer uses? Odds are it isn't much better and I would stop the process if I could and have your contribution dropped to the bare minimum allowed by your company (5% for mine).

Then do your own thing with the contributions where you can control it al.

I am using 10X but you don't need to...but visit this page to see what even reasonable fees do to your retirement.

https://www.10x.co.za/
 

deweyzeph

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The problem doesn't seem related at all to the your thread title (leaving it in the old employers funds) but rather just leaving it in a crappy fund in the first place.

I wouldn't have moved it to my new employers fund and rather separated it completely and done my own thing where I have full control.
The problem is there are a number of unscrupulous employers in this country who make it a condition of employment that you invest in their chosen funds (and medical aid schemes for that matter), without giving you any option of making your own private arrangements.
 

SauRoNZA

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The problem is there are a number of unscrupulous employers in this country who make it a condition of employment that you invest in their chosen funds (and medical aid schemes for that matter), without giving you any option of making your own private arrangements.
For the most part they do this because people are idiots and if they weren't forced would go without which has a negative effect on the employer.

So sure for some of us who know how this works we can do better ourselves but for the vast majority it is actually do their benefit because they would have **** all otherwise.

Would hardly call it unscrupulous.
 

Kosmik

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So much is not correct with your post, they were eating your funds all along, your contributions just hid it. Nothing wrong with keeping it there in and off itself, but I would have moved it to an RA. If I keep my 10X work fund with my employer if I leave them, it will not suddenly do badly.
Actually preservation funds exist for this very reason. Move and forget.
 

deweyzeph

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For the most part they do this because people are idiots and if they weren't forced would go without which has a negative effect on the employer.

So sure for some of us who know how this works we can do better ourselves but for the vast majority it is actually do their benefit because they would have **** all otherwise.

Would hardly call it unscrupulous.
The only negative effect it has on employers is that they wouldn't get their kickbacks from the fund providers they force you to use.
 

SauRoNZA

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The only negative effect it has on employers is that they wouldn't get their kickbacks from the fund providers they force you to use.
I was more specifically referring to the forced medical aid with that comment.

But it's more of a social responsibility thing with regards to the funds. And there are insurance benefits to it with infinitely cheaper group life.

If a company is getting kick backs...yes that would be unscrupulous but I would love to see evidence of that and not just assumptions.
 

Kosmik

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Nah, I don't even want to be tempted with the "one withdrawal allowed" thing of a preservation fund...
Well the idea is that it's for retirement. Although I did use mine to help purchase our house ( first 3 years employments pension ). Actually made more sense as the investment will reap more over the years than if i had left it there.
 
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