The 4 NB money moves to consider when leaving your employer

Published on 28th February, 2023 at 06:14 pm

A career change is an exciting and energising time, often affirming your skill and expertise in your field. But with a job switch come important personal finance considerations. We look at four important money moves to consider when leaving your employer.

Reading time: 4 minutes

In this article you’ll learn:

• What to consider financially when exiting employment.
• Risk cover and retirement savings options you have when changing jobs or leaving formal employment.
• How Wealth Bonus can ease your financial decision-making throughout your career.

1. Assess your employee benefits

If you’re moving to a new employer, their employee benefit options should be top of mind when you assess the remuneration package offer.

“Employee benefits can be very valuable, and you should aim for an outcome where you are not worse off at the new employer,” says investment specialist Madri Jacobs of Brilliance BlueStar, authorised by Sanlam.

“If they don’t offer similar benefits to your previous employer, try to negotiate with them in order to cover the cost of individual policies outside of the employer’s risk benefit scheme. In practice, it will mean that they might have to pay you a bit more to be able to obtain your own insurance and provide for retirement savings.

“My clients often involve me to review the employee benefits of the new job offer versus those at their existing employer, to help them in their negotiations,” Jacobs adds.

Also enquire with your employer about any options to convert your group risk cover benefits to an individual risk cover option. For example, Sanlam has an ‘Exit Cover’ option, which allows former members of Sanlam Group Risk benefits to enjoy a continuation of cover without a waiting period if certain conditions are met. Learn more about this here.

2. Review your existing financial plan and update it

One of the biggest implications of leaving an employer is to decide what to do with your retirement fund value. “It is recommended to keep preserving it for retirement, whether at the new employer or in a preservation fund,” adds Jacobs.

According to Busisiwe Maswanganyi, a Sanlam consultant for product support, a preservation fund can be a useful tool. “A preservation fund helps you to continue growing the money you have saved so far in the pension or provident fund until retirement,” she explains. “You don’t pay tax when you transfer funds from a provident or pension fund to a preservation fund.”

The Sanlam ​​​​​​​Cumulus Echo Preserver is a preservation fund offered by Sanlam that is also a Wealth Bonus participating product. When you take out a Sanlam Cumulus Echo Preserver, you can earn Wealth Bonus, Sanlam Group’s monetary reward for long-term wealth. Because it’s a participating Wealth Bonus product, every time you contribute towards it, Sanlam contributes to your Wealth Bonus, which eventually unlocks at certain milestones and pays out in cash. Find out more here.

While in some cases you might need to access your funds due to personal reasons, Jacobs warns that it is extremely difficult to catch up on retirement savings that you withdrew in the past. Withdrawal of retirement savings before retirement age also comes with hefty tax implications. Instead, setting up smart savings habits will ensure you have additional funds in the bank.

3. Improve your savings habits

Start by reviewing your emergency fund value, suggests Jacobs. Ideally you should provide for three to six months’ household expenses and needs. This fund might also sustain you in between jobs. Next, review your savings for specific goals, such as your child’s education.

“Much the way fitness trackers use targets to help us meet our wellness objectives, goal-based saving can inspire us to stay on track with our long-term financial objectives,” explains Maswanganyi.

Speak to an expert about your financial decisions when exiting employment to ensure you can make an informed decision. Book a meeting with one today and earn 8 000 tier points.

4. Want to contribute independently?

“While pension or provident funds are provided by an employer (often as a condition of employment), a retirement annuity (RA) is owned privately, and wherever you work throughout the years it will not be impacted,” says Maswanganyi.

This might suit a person who is thinking of starting their own business or working independently as a contractor or freelancer. An RA is also an option for those who are seeking to boost their current retirement savings.

If you’re considering taking out risk cover when you leave your employer, why not consider a Sanlam Premier risk cover product? When you take out a Sanlam Premier product, you can earn Wealth Bonus, Sanlam Group’s monetary reward for long-term wealth. Because Premier risk products are participating Wealth Bonus products, every time you pay a premium, Sanlam contributes to your Wealth Bonus, which eventually unlocks at certain milestones and pays out in cash. Find out more here.