Are you leaving your current job, but not retiring, and unsure of what to do with your pension capital?

Whether you are moving to a new job, leaving your current job to start your own business, or are in a position to take control of your pension savings deciding what to do with the pension capital you have built up is an important decision. Just as when retiring there are considerations and regulations that may inform what choice is best for you.

Whether you have been contributing to a pension or provident fund you will be able to access the entirety of your funds but if you do not move the funds to an appropriate investment solution and cash out you will be taxed on your share of funds. As much as it can be tempting to take the capital and use it; there is a strong case to be made for preserving it. You are able to access a portion of R25 000 tax free at this point which you may want to consider taking and investing separately or using it to pay off debt. However taking this tax advantage now will make you ineligible to take a larger tax free portion of R 500 000 later at retirement.

Saving and preserving are essential financial actions that will benefit you over the long run. Appropriate and sufficient retirement planning will allow you to retire at a comfortable age with the knowledge that you are financially secure. Building up enough capital and making that capital work for you in a profitable and sustainable way makes financial independence a real possibility. We want to make sure you are financially secure in your retirement. We can help you with this.

Preservation funds are registered under the Pension Fund Act. In a preservation fund you are able to preserve your capital while still maintaining a level of flexibility in the investment. A preservation fund works differently to a normal pension fund in the accessibility to funds and investment flexibility. If you were to transfer your share of funds to an existing pension fund you would only be able to gain access to your capital at retirement. With a preservation fund you have the opportunity to make one withdrawal (full or a portion) before retirement. This flexibility could allow you to draw capital and make a separate independent investment, buy a house, start a business, pay for tuition or cover other costs. A preservation fund is also a viable option if your new employer's fund is of a different type to your previous one. Pension capital can only move to a pension fund and it is the same for provident capital but a preservation fund can, in most cases, take both under its separate pension and provident sections.

Unfortunately you will not be able to make contributions to a preservation fund beyond the initial lump sum. Here you would need to find another form of investment for your new pension contributions or savings. It could mean making use of your new employer's fund if one is available or investing in a retirement annuity or your own portfolio if you need to make your own plans. Building your own portfolio for the purpose of saving for your pension has a number of tax considerations that we would need to explore with you before you make a final decision.

A preservation fund offers you more freedom because the investment of your pension savings is in your own hands. You have the discretion to invest your savings in a fund whose investment style is suited to your investment needs. You also have the ability to transfer easily to another preservation fund if you are unhappy with your current one. In short, you retain control over your capital.

If you are in the position to take control of your pension capital let us talk to you about our preservation fund and help you to choose the most appropriate solution for your investment needs. Our preservation fund is able to provide your pension capital with investment portfolios that are geared to capital growth and protection as well as exposure to offshore investment.

Correct and up to date as at 1 July 2014.
VPM Preservation Pension and Provident Fund: Fact Sheet
Financial Security through securing your Pension Capital


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