What if the company you move to doesn’t have retirement benefits?

Last updated on 19th November, 2024 at 09:57 am

If your new job doesn’t offer retirement benefits, it’s important to know how to manage and grow your savings on your own.

Reading time: 4 minutes

In this article, you’ll learn:

• How to manage your retirement savings if your new job doesn’t offer benefits.
• Options for setting up your own retirement fund if you’ve never had one before.

You’ve finally secured the job you’ve wanted, and in your excitement and relief you might not immediately pay attention to the company benefits while you’re signing on the dotted line. But if your new job doesn’t offer retirement benefits like your old one did, it’s important to plan ahead. Here’s how to look out for yourself, whether you have previous retirement benefits or not.

Scenario 1: You have retirement funds from your previous company. What can you do with it now that you’ve joined a new company?

“You can keep your retirement funds with your previous employer and become a deferred member, “says Adele Barnard, Sanlam senior financial planner and investment specialist. “This means you leave your fund value until you retire.” You could also transfer your previous employer’s retirement fund to a preservation fund, like a preservation pension fund or a preservation provident fund, she continues, but “you can’t make additional pension fund contributions towards your preservation funds.”

Another option is to transfer your retirement savings to a retirement annuity (RA) in your personal capacity, where you can continue contributing. “A retirement annuity will be a fantastic solution if your new employer doesn’t have retirement benefits,” Barnard shares.

A third option is cashing out your funds, which Barnard doesn’t advise, or you can cash out a percentage and move the rest to a pension/provident fund or an RA. Keep the new two-pot retirement system in mind, she says: “With the two-pot retirement system, members will make compulsory contributions towards their savings pot, which is accessible before retirement, and preserve a portion, which can only be accessed at retirement.”

Scenario 2: You’ve never had a company pension fund and want to set up your own retirement savings

“Use an RA as a retirement solution and investment vehicle,” Barnard says. While you could transfer these funds to a company pension fund in the future, she cautions that you’d miss out on your Sanlam Wealth Bonus additional allocations if you do so. “With an RA, you and your adviser have more control over fund selection, unlike a company fund, which often only offers limited and more generic funds or portfolios to select from.”

When it comes to growing your investment, Barnard says that you should always make sure you’re invested in funds that align with your goals, objectives and especially your investment term. You can also utilise a tax-free savings account (TFSA) as a supplement component to retirement planning, she adds. “Returns are free of tax and accessible at any time, and the maximum contribution per year is R36 000.”

Even if your new job doesn’t offer retirement benefits, there are many ways to keep your finances on track. A financial planner can help you find the right options and make smart choices for your future.