Pension fund withdrawal

[I.am.Sam]

I have moved jobs and i want to withdraw the little pension fund that i collected

my company gave me options and one was to cash it ?

The most appealing of these is a cash withdrawal benefit !!!
All cash withdrawals are taxed according to a special tax scale published by SARS. The first R 22.500 is tax free from 01 March 2009. All withdrawals will be tracked by SARS, and this value is cumulative over all your future years, pre-retirement.

so i just wanted to clarify.

If i take cash then it will be tax free since its below R22500

If i dont and say i want it later on, and i have R100 000, will they only tax the R77500 since that R22500 is tax free

 

[Ancalagon]

Why do you want the cash? Its a better idea to transfer it to another pension fund, which is tax free for the entire amount. What would you want to do with the money?

Also, I dont think you can withdraw part of it - I think its all or nothing. Not sure though.

 

[creeper]

Unless you ABSOLUTELY need to money, don't cash out. Rather put it in something that will grow on average 8-10% a year. Move it to your new job's pension fund and but it in an aggressive portfolio or put it in a preservation fund.

Why? Because you will spend the money. If you keep it in an investment running at 8%, in 10 years, it will be more than double.

 

[Compton_effect]

Agreed. I'm in the process of transferring my last companie's pension fund to my new one.
Unless you really need it - don't touch it!

 

[I.am.Sam]

i need the money or i think i do.

explain to me the tax part.

Say i dont withdraw but i transfer to an investment account

in 10years i get R100000

will that whole R100000 be taxed ? or will R77500 be taxed

or no tax at all since its my 1st withdrawal.

and what are good options, transfer to current employee ? or create an investment account ?

the amount is below R20k

 

[senyetse]

Do NOT touch that money unless it is a life or death situation! No seriously, think very carefully about this. You are going to regret it one day if you cash it. I've seen too many people of retirement age who did just that and today sit with very little retirement savings or none whatsoever.

 

[DJ...]

You only ever withdraw from a pension fund if you absolutely need the cash. A better option is to move it to a preservation fund for the interim or to the new company's pension scheme. You will be taxed at your average rate over the last two years iirc on the R77,500 and you can only withdraw once...

 

[I.am.Sam]

ok i guess then best is to transfer to my new company

and later on move to an investment fund

thanks

 

[Cius]

Definitely move it. It looks like a little money now but you are robbing yourself of millions in the future due to how compound interest works. Seriously, re-invest. Never take it out.

 

[azbob]

on a related note, say you moved your pension to a preservation fund between jobs, would it be better to leave it there and start a new pension fund with your new job or to merge the two?

 

[DJ...]

on a related note, say you moved your pension to a preservation fund between jobs, would it be better to leave it there and start a new pension fund with your new job or to merge the two?

Combine the two...

 

[Cius]

Definitely better to combine the two in terms of costs etc. The risk however is that all your eggs are in one basket then. Personally I would move my pension and combine into the new one but then have my pension at the new company split into a few funds.

 

[hellfire]

i need the money or i think i do.

explain to me the tax part.

Say i dont withdraw but i transfer to an investment account

in 10years i get R100000

will that whole R100000 be taxed ? or will R77500 be taxed

or no tax at all since its my 1st withdrawal.

and what are good options, transfer to current employee ? or create an investment account ?

the amount is below R20k

Most pension funds enforce that you can't will-nilly withdraw - it will have to be now, or when you leave your next job

 

[DJ...]

Most pension funds enforce that you can't will-nilly withdraw - it will have to be now, or when you leave your next job

Actually it is legally mandated and the pension companies simply enforce the law. One withdrawal allowed over the duration of the investment's life, taxed at an average of the last two years' income. That's the last I heard on the matter, although I haven't worked in the asset management industry for a few years now so my info might be outdated...

 

[Alton Turner Blackwood]

Put that money in an RA so you know you can't withdraw come hell or high water. No temptation

When I was about 25 I started investing in an RA. So that's 7 years ago. About two years ago I thought fsck it, I'm broke, I'm going to cancel this thing and use that money (which was a blond moment). So I called them up and you know what they told me?

"Sir, you specified your retirement age as 55, thus this money will only be available then"

So yeah, I've got that growing at a nice pace and actually started to contribute to it again - after regaining my senses about saving for retirement.

 

[DJ...]

RAs can be withdrawn from under certain circumstances but subject to limitations. Rules changed in 2008...

 

[satanboy]

Never take the money...you will regret it 20 years from now.

 

[shubz]

Preservation fund all the way, and you're still young put it in a aggressive portfolio. Should you ever really need it you can cash it in, if you move it to your new employers fund the only time you can access it is when you leave that employer.