Moving to a new job could have unforeseen consequences when it comes to your retirement planning. It is not a problem if you do not already have pension provisions in place and then join your new employer’s provident fund or pension plan. However, what happens when you already have a pension plan in place? Here’s what to do with your pension when changing jobs.

How do workplace pensions work?

Employers set up retirement annuities or provident funds as a benefit for their employees. A certain percentage of your salary is held back as a contribution to the fund, which is usually matched with an equal contribution by the employer (or a different percentage, depending on your terms of employment). Upon retiring, you can then live on the benefits of the plan, either as an annuity or a lump sum (again, this depends on the terms of the plan in question.

How do I find out if I have a pension?

If your employer offers a pension plan, you will have been notified of this when you joined the company. You should have received a breakdown of your remuneration and benefits, which would have included contributions to the company retirement plan or provident fund. You would have had to fill in the relevant paperwork to join the plan too. Your monthly payslips will also clearly state that contributions are being made to the plan.

What do I do with my transferred pension?

When you leave one company and move to another, your retirement planning can get a little complicated. You are already a member of one pension plan, and now you are moving over to another. You have three options with regard to your old pension plan. You can either cash it in, you can transfer to your new employer’s plan, or you can choose a combination of the two. It is not advisable to cash in. This is quite a popular option in South Africa, which is one of the reasons why many South Africans are inadequately prepared for retirement. Instead, you can transfer to your new employer’s plan, with your current savings intact, and tax-free. You can choose to cash out a certain amount from your existing plan and transfer the rest. However, it is a better idea to simply transfer it in its entirety to ensure that you have the maximum possible amount available to you when the time comes to retire.

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