My Money Matters Toolkit - Retiring from your employer

Retiring soon

Preparing to make decisions will give you the best chance of having enough to live on in retirement. It’s also important that you keep playing an active role in your money matters after you leave your employer.

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You need to make two important decisions when you retire

Preparing for retirement often leads to making other changes in your life

Other useful information about your retirement fund

Your two important retirement savings decisions

Should I retire now or later?

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What type of pension is right for me?

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Find out more about your retirement savings options as you prepare to retire from your employer

For information that’s specific to your fund or employer’s benefits find out more

Watch

this video to find out more about your options, as you prepare to retire

Read

this brochure for more about your options, as you prepare to retire

Look

take a look at the othet solutions you can get from Alexforbes

Why consider financial advice?

The information on this site is designed to help you make informed decisions, as you get ready to retire. Once they’re informed, many people need or rely on a financial adviser to help them make the choices that are right for them based on their personal circumstances.

Is someone you know retiring soon?

Email them a link to share this information that will also help them with the decisions they need to make about their retirement savings, as they prepare to retire.

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Should I buy a pension?

When you think about the next phase of your life you may feel excited, sad, nervous or all of these, and a lot of other feelings too. Knowing your options will help you feel prepared.

One of the most important financial decisions you'll ever make is what to do with your retirement savings when you reach retirement.

Most people use the amount they’ve saved up in their employer’s retirement fund to buy a monthly pension. This ensures that they get an income during retirement once they’re no longer earning a salary.

Different pension types

If you decide to buy a pension, then you’ll want to know which type of pension will meet your needs and personal circumstances.

Do you know what type of pension would best meet your needs?

You can choose between two main pensions:

a guaranteed pension for life, or
a flexible pension that is linked to the value of your investments and must be managed

You can even choose a combination of the two.

How your retirement savings are taxed depends on:

how much of your savings you use to buy a pension
how much you withdraw in cash

Watch this video to help you decide, or
Read this brochure to help you decide.

Get on top of debt

Two important things that help you stay on top of your debt:

Keep track of your credit report. According to the National Credit Regulator, you are allowed to access your credit report once a year for free. Visit NCR to find out more.
Using debt wisely.

Know your credit score

Credit bureaus calculate your credit score based on your spending and how you manage your finances. They will give your credit report to any shop or financial company that you request a store card from or apply to for a personal loan. Make sure you know what’s on your credit report and that it’s all correct. Review your credit report at least once a year to assess and improve your position, if need be.

You can request your credit report from any of the major credit bureaus.

Some tips if you are thinking about borrowing money.

Be honest about how much you can actually afford when applying for credit. Don’t guess your expenses. Use your actual expenses from the last year and make adjustments for any increases you think are likely to have in the future.
Understand what you are signing and agreeing to in all the terms and conditions.
To pay off your debt faster, you need to pay more than your minimum monthly installments. It’s generally a good idea to try to pay off your most expensive debt (debt with the highest interest rate) first.

A debt-to-income ratio is calculated as follows:

Monthly debt repayments monthly salary before tax 100.

What type of investment portfolio should I choose if my fund offers me a choice?

Every month, you and your employer make contributions to your fund. These contributions are invested to make your savings grow with interest as fast as possible. Investments are an important part of any retirement fund, especially in the case of a defined contribution fund, where the members carry the investment risk. This means that the growth on the portfolios that your retirement fund savings are invested in will have a big impact on how much money you’ll get one day when you retire or leave the fund.

It’s important for each retirement fund to have a well-thought-out investment plan so that your retirement savings can grow over time. The trustees, in general, will offer a range of investment portfolios to cover the different needs of all the members.

The higher the risk, the higher the expected reward. And the lower the risk, the lower the expected reward. You want to find the right balance based on your age, your stage in life and your own circumstances.

How do you get your retirement fund savings to make more money for you?

An investment portfolio can have portions invested in various Investment types, called ‘asset classes’. The spread across investment types is known as ‘asset allocation’. The main investment types or asset classes that your fund can invest in are shares, bonds, property and cash.

Investment portfolios are divided among different asset classes and investment managers are responsible for determining which mix of assets should be held in a portfolio.

The best asset allocation for you at each stage of your life will depend on how many working years you have left until retirement (your ‘time horizon’), as well as your ability to tolerate investment risk.

Investment classes and time in the market

Time will determine where and how you invest. It’s important to look at how the different types of investment classes have performed over time.

Access more information on shares, bonds, property and cash.

Other useful information about your retirement fund

What’s a retirement fund?
When you’re no longer earning a salary at the end of your working life, you can use your savings in your retirement fund to buy a pension that will give you regular income. Your employer has provided you with a provident or pension fund.

How does a retirement fund work?
- Every month, you, your employer or both make contributions to your fund.
- These contributions are saved towards your retirement. You can use your retirement savings to buy a pension that will give you a regular income in retirement.
How much your pension will be depends on:
- how much you or your employer contribute during your working life
- how investments have performed
- whether you keep your retirement savings invested instead of taking them in cash when you change jobs
- the cost of buying a pension when you retire
What is a benefit statement?
A benefit statement shows:
- how much you’ve saved so far for retirement
- the pension you can expect based on the information we have about you
Here’s an explanation of your benefit statement.
View your benefit statement by registering on AF Connect. Your benefit statement will tell you how much you’ve saved and which portfolios your savings are invested in. You can also download the AF app on the Apple App Store or the Google Play Store.
How long before I retire should I start preparing for retirement?

If you’re closer to retirement, make contact with a financial adviser as soon as you can. We recommend that you start discussing your retirement plans with a financial adviser at least five years before your fund's normal retirement date.
Can I retire early if I’m too sick to continue working?
You can retire early on the grounds of ill-health, if you:
- become too sick to carry on working
  AND
- have not reached the fund’s normal retirement date BUT don’t qualify for a disability benefit
  AND
- are totally and permanently unable to do your job
The benefit you get will be the value of your retirement savings in the fund.
Can I keep working at my company after I reach the fund’s normal retirement date?

The age you must retire is determined by the rules of your retirement fund. However, if you don’t need to start receiving a pension right away (for example, if you are able to continue working on a contract basis), you can keep your retirement savings invested in the fund until you’re ready to buy a pension. This is called delaying or deferring retirement. Your financial adviser can explain which of your retirement fund benefits will stop if you choose this option. Find out more about delaying retirement here.
How much do financial advisers charge and how are they usually paid?

A financial adviser can help you to make a financial decision that is right for you based on your individual circumstances. Financial advisers charge fees that are based on the financial products they help you select. For example, if a financial adviser helps you to use your retirement savings to buy a flexible pension or a guaranteed pension, you will be charged a fee.

Fees can be charged up front when you buy a pension and on an ongoing basis if you choose to receive ongoing advice. The up-front fee a financial adviser charges is limited to 1.5% + Vat of the amount you use to buy a pension, but the actual amount is negotiated between you and your financial adviser. The fees are usually deducted from the amount you use to buy a pension.

Please contact our My Money Matters Centre, where you can receive retirement benefit counselling and advice from our qualified financial consultants.
How long will it take after I retire to start receiving my money?

After retiring, you may experience a delay in receiving income for the first month due to administrative processes. This is because administrators wait until your last fund contribution is received and invested. To prepare, financial advisers suggest setting aside funds from your savings, leave payout, or using a credit card. It's also advisable to notify creditors of potential delays in payments, as the process may take six to eight weeks. Since these forms take time to complete, it’s a good idea to start the process at least three months before you retire.
Can my retirement savings be divided between flexible and guaranteed pensions? Are there investment fees on a pension?

Your retirement savings can be divided between flexible pensions (living annuities) and guaranteed pensions (life annuities). There may be up-front and ongoing fees but the amounts will differ depending on the type of pension you choose and what is agreed on by you and your financial adviser.

In the case of a flexible pension, there will be investment fees on your investment portfolios. Investment portfolio fees are deducted from the value of your investments and won’t be shown separately on your statements. An administration fee is also charged for the administration involved to pay your pension to you and for preparing and submitting your tax information.
How much cash should I take at retirement?

You don’t have to pay tax on the first R550 000 you withdraw in cash from your retirement savings. The tax-free amount depends on how much cash you’ve taken from your retirement savings in the past. Some people choose to only take the tax-free portion at retirement but you can consider taking more if this extra cash can help you structure your income in the future. Depending on your income needs, you could save tax over a longer period of time (like five to ten years or more) by paying some tax now.
Can I set up more than one flexible retirement income stream (living annuity)?

If you have a larger amount to invest, it can be worthwhile setting up more than one flexible income stream with the same service provider. In the future, you may want to convert from a flexible retirement income to a guaranteed retirement income. Remember, each flexible retirement income stream can be converted individually.

Retiring in the next few months

Retiring soon

Your two important retirement savings decisions

Find out more about your retirement savings options as you prepare to retire from your employer

For information that’s specific to your fund or employer’s benefits find out more

Other useful information about your retirement fund