You may have to cash in your retirement savings – but read this first
The lockdown has crippled the economy and, as a result, companies are retrenching en masse.
Many of the recently retrenched will be tempted to raid their pensions funds to make ends meet – is this wise?
Refilwe Moloto interviewed Andrew Davison, Head of Advice at Old Mutual Corporate Consultants.
Davison spoke at length about the pros and cons of using retirement savings during this unprecedented emergency.
If you only have this one source of savings, then potentially you need to use it… [but] retirement is still going to be a reality at some point…Andrew Davison, Head of Advice - Old Mutual Corporate Consultants
In a retirement annuity, you don’t have access until you’re 55, even if you change jobs… A pension or provident fund is linked to your employer… when you change jobs [you gain access to the funds] … if you are retrenched you can access your retirement savings…Andrew Davison, Head of Advice - Old Mutual Corporate Consultants
There are tax implications [of withdrawing] … a deterrent to stop people from taking their money… There are no penalties [beside taxes] … [But] your retirement savings are set back…Andrew Davison, Head of Advice - Old Mutual Corporate Consultants
Look at the rules of your pension or provident fund… Those would determine how a contribution holiday might be taken… In general, the rules are flexible… A rule change can be done relatively easily…Andrew Davison, Head of Advice - Old Mutual Corporate Consultants
The portion that pays for life and disability cover… pay those! You don’t want to add devastation… because you didn’t pay the premium. But, generally, it’s a small portion [of the monthly contribution] …Andrew Davison, Head of Advice - Old Mutual Corporate Consultants
Listen to the detailed discussion in the audio below.
Source : https://www.123rf.com/photo_60172516_hand-holding-hammer-over-a-broken-piggy-bank-.html?term=broken%2Bpiggy%2Bbank&vti=o2d6fcxmuhjq9mcbei-1-35