When changing careers there is more than just your work to consider, there are also your benefits – and particularly your pension funding. Your retirement funding is the best way to save money; it’s a disciplined, cost-efficient structure that provides valuable tax benefits. So when moving from one company to another, or even to your own business, you would have to consider what you might be losing, but also the best way to ensure you don’t lose out on those important contributions.
Basically, you have three options: you can cash in your pension/provident fund; you can transfer it to your new employer’s fund; or you can invest it in an RA or preservation fund in your name. This preserves your savings, your future return on those savings, and the tax benefits attached to those savings. Cashing it in is hardly a good idea. Your pension money is very important to your retirement planning and making every hard-earned penny work for the future is crucial. The compound value of that money is far more than the value of a new car or an overseas trip.
Remember your value when negotiating your package
Changing jobs/careers and your savings profile may even benefit you. You may find that your new options in personal investment present you with a better deal than your old company’s scheme; or your new position and/or career direction may well provide greater promise for improving your savings outcome in the long run.
For some, perception exists that people who have changed careers midstride will have to work longer to make up for the shortfall in savings resulting from this adjustment. There will be a time in your new direction that will see you concentrating on new training; you might be starting at the bottom of your newfound career, and that usually means a drop in wages. Don’t get caught in a loss situation for too long; boost your value to potential employers by highlighting your skills in communications, teamwork and leadership. These aspects are valuable across all fields and roles.
Even if you have to take a pay cut, which in turn means your contributions to your pension will be less, it’s important not to sell yourself short when taking up a new position. Some career websites such as LinkedIn offer free online tools that can help you estimate what your pay will be if you change roles.
“Your professional market value is not a fixed number – it is one that has to be adjusted not only with your education, experience and expertise, but also with the context of the market you’re working in and the company you’re working for.” ~ Rachel Kim, Senior Manager, Career Advisory Board.
The growing job-hopping trend
While the new job may be way more enjoyable than the old, the earnings numbers have to be counted. In short, what are you going to do with less money, even if it’s just for an interim period while your settle in and find your feet? Will you adjust all expenses downwards? Remember, it’s not just your current lifestyle that is affected, but your future retirement years. Keeping your contributions up and even increasing them should be part of your financial planning at this point.
New jobs don’t always come up to expectation, and very soon you may be bored or disappointed that initial promises are not being kept by management. Solution: job hop again. This trend is growing particularly among millennials. But it’s a trend potentially detrimental to your retirement savings. Millennials have had on average close to three jobs within their first five working years, which is indicative of how the career landscape has changed over the last couple of decades.
People change jobs for financial, emotional or educational aspects in the main. Lifetime loyalty to one company is no longer so important. But a consequence may be the detrimental effect on retirement funding. While experience in a variety of roles may make you attractive to potential employers, how does your pension fund shape up in relation to that far off, never to be reached retirement age?
Your career, your future
Amongst job hoppers today, in tandem with the new ‘work anywhere’ trend, retirement is not a good word. But even millennials will grow old – and taking care of yourself in the inevitable (and unknown) future, is as vital now as it was in your parents’ days. So by all means change jobs/careers/lifestyle but never leave your retirement funding behind on the rocks.
Change with intelligence and perspicacity: compensate for any losses as quickly as you can; carry your own pension/investment funding with you at all times; contribute as much as you can; downsize less for a salary and more to ensure your funding contributions remain the highest you can afford. Old age is not a fantasy – and it strikes at different ages and in different ways for every individual. Be realistic and canny, and emerge a winner. Careers are about happiness – yes – but they are always about the future.
Check your policies, check your life
VeriFi is an online tool that provides you with an immediate and up-to-date overview of all your life insurance and investment policies by sourcing information from all the major life insurance companies – and presenting the information in a comprehensive report.
With VeriFi you are able, for no charge, to access information on all your life and investment policies at a glance. You are able to check the types of policies you have, the names of the insurance companies providing the cover, the nature and extent of the insurance cover provided – and other vitally important information such as the details on your policies being correct.
To find out more, please visit: www.verifi.co.za