Your Options if you Resign

YOU CAN PRESERVE YOUR RETIREMENT SAVINGS OR WITHDRAW THE CASH

  • When you resign, you will need to make an important financial decision – what should you do with your retirement savings?
  • When you leave your employer, preserving is when you leave your retirement savings in the current fund or transfer them to a new fund instead of taking the cash.
  • The aim of your retirement savings is to provide you and your family with financial security when you retire and are no longer able to work.
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Preserve your retirement savings!

Not cashing out your retirement savings will help ensure that you are in a better position to retire comfortably one day.

If you do not preserve your funds:

  • You will no longer have the money saved.
  • You will lose all the interest that your savings would have generated.
  • You will also lose the compound interest that you would have earned.

When you resign you have two options:

OPTION 1: Preserve your retirement savings

REDUCE THE RISK OF NOT SAVING ENOUGH FOR YOUR RETIREMENT

1. TRANSFER YOUR MONEY TO YOUR NEW EMPLOYER’S FUND

  • You don’t pay tax on transfer.
  • You can take a portion of your Fund Credit in cash, which is taxable, and transfer the balance tax free.

2. LEAVE YOUR MONEY IN THE CURRENT FUND

  • This is a cost-effective option because of lower pricing.
  • You cannot make any additional contributions.
  • You can withdraw your full Fund Credit before you retire. If you withdraw only part of your Fund Credit, the balance must be transferred to another fund.

3. TRANSFER YOUR MONEY TO YOUR NEW EMPLOYER’S FUND

  • You don’t pay tax on the money you transfer.
  • You can take a portion of your Fund Credit in cash, which is taxable, and transfer the balance tax-free.
  • You can make a once-off withdrawal from the preservation fund. This single withdrawal allows you to take all or a portion of your money.
  • You can transfer from a preservation fund to a future employer’s fund.
  • You cannot make any additional contributions.
  • The AFRIS Preservation Fund is available to you. This fund combines the benefits of a living annuity with a guaranteed life annuity, allowing you to leave a legacy for your beneficiaries, while providing you with a guaranteed income once you retire.

4. TRANSFER YOUR MONEY TO A RETIREMENT ANNUITY

  • Your Fund Credit is preserved for your retirement.
  • You don’t pay tax on transfer.
  • You can make additional contributions.
  • You cannot withdraw any money until you retire, unless you emigrate.
  • You can take up to one-third of your benefit as cash when you retire.
  • The In-fund Living Annuity has the lowest fees. It also allows you to remain a member of the Fund and stay part of the Woolworths family when you retire. You may also elect to invest in one of the four default investment portfolios chosen by the trustees, who will continue to manage your investments.

OPTION 2: TAKE YOUR RETIREMENT SAVINGS IN CASH

INCREASE the risk of not saving enough for your retirement.
Since most of us cannot resist the temptation to spend money that comes our way, the best option is to preserve your retirement savings when you resign.
  • When you retire, your quality of life will depend on how much money you have saved over your entire working life.
  • If you spend your retirement savings, you will have no money to provide you with a pension when you get older and are no longer able to work. Think very carefully therefore before taking your retirement savings in cash.
  • An advantage of preserving your retirement savings is that your full benefit which consists of:
    • your contributions
    • the company’s contributions
    • the investment returns
    is transferred and it is tax-free.
  • If you withdraw the cash you will receive your Fund Credit, but tax will be deducted before it is paid to you. You will receive less money.

TAX – THE DIFFERENCE BETWEEN PRESERVING AND WITHDRAWING

RATHER PRESERVE YOUR RETIREMENT SAVINGS
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  • All amounts exceeding R25 000 that you withdraw in cash before you retire will reduce this tax-free amount.
  • The tax free amount that you can take in cash depends on all your cash withdrawals from your retirement fund.
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  • When you retire, you can take a total of R550 000 of your retirement savings TAX FREE.

Some Important Financial Tips

  • Contribute as much as you can afford to your retirement fund savings. Additional Voluntary Contribution Form.
  • Keep an emergency fund by having at least 3 months' salary saved and set aside. This is only for emergencies.
  • Manage your debt. Pay back your loans and do not borrow money. Only buy things with money that you have.

Your other benefits

You may also convert your current Fund death benefit, your disability benefit and your Group Life Assurance (GLA) to private membership. The attraction of doing this is that you won’t need to have a medical examination, but you will need to provide your latest HIV test results. The procedure is as if you were buying cover in your personal capacity.

The value of expert advice: We recommend getting financial advice from a qualified financial adviser. Contact Alexforbes Individual Advice Centre (IAC): Call 0860 100 444 or 011 324 3412, or email iac@alexforbes.com.