Employer

Five things to remember when leaving your employer

There are a few events that can change life, and even if it’s a change for the better, it can still be overwhelming. It is estimated that an average person will have up to 12 different jobs in their lifetime. 32% are individuals between the ages of 25 and 44 considering a professional retraining. The last two and a half years have dramatically changed the mindset of – well – everyone I know. More than ever, we are reconsidering the type of industry we are in, location, lifestyle, income and working hours.

There are a few fundamentals we need to remember when changing employers, as it will benefit both you and your family:

1. Preserve

One of the most tempting decisions individuals make when changing employers is whether or not to access their retirement fund. Young people often feel that the lump sum they have saved so far is marginal and withdrawing the funds to pay off debt or cover any other expense will be a better option. The power of compound interest over time proves the outcome is different.

Not only is this withdrawal taxable (only the first R25,000 will be tax free, after which a sliding scale applies, which can leave you with quite a large amount in Sars), but you’re wasting valuable time in the market . The illustration below explains the power of preserving your funds:

2. Continue your risk benefits

Many employers offer risk benefits under a registered or unregistered group plan. This differs from employer to employer, but can include the following: death cover, disability cover, critical illness cover, income protection, funeral cover and education cover for your children – sometimes even on a scale world.

You will have the option of taking over these benefits and restructuring them on a personal basis. In most cases, no medical underwriting applies, which makes the process very convenient and ensures that “clean” coverage is structured. This way you can ensure there is no coverage breakdown and that you and your family stay protected.

However, there are exceptions to subscription. Also keep in mind that the premium will be different from what you pay on the group plan, as you are switching to individual capacity and no longer on the group rate.

3. Medical help

If your medical aid is structured by your company or perhaps even subsidized, it is imperative to transfer your debit order/premium payer data to your personal capacity at this point. Your plan may also be revised at this point with your gap coverage. It is important to make sure you keep your medical aid in place.

4. Review your portfolio globally

This is the perfect time to schedule a session with your financial advisor to review your portfolio comprehensively. With some changes occurring with a possible continuation option as well as the preservation of your funds, this could impact advice on your portfolio as a whole (including the investment portfolio and your retirement planning, planning risk management, short-term insurance as well as succession planning).

Maybe your new employer offers different benefits than you had, and it’s important to understand what you have and what possible restructurings are needed at this point. I would be careful to compare apples to apples, comparing the previous benefits you had to the new benefit structure offered by the new employer.

Some good questions to ask your HR/benefits/payroll manager at the new employer:

  • Do I have a continuation option?
  • For which risk benefits am I covered?
  • Do I have the option of “flexibilizing” or increasing my benefits?
  • Where is the retirement fund invested? Is there a default investment option?
  • Can I choose to leave this portfolio and choose my own investment portfolio?
  • Does the employer contribute to the pension fund or is it just my contribution?

5. Review your will

It is always important to review your will after a major life change. This is one of the most important documents you will compile in your lifetime, especially if you have family and dependents. Many of us neglect to review it over the years. First, make sure you have one in place. Second, make sure your will is current and validly executed, providing for any changes in your life or family.

I would advise you to make an appointment with a financial advisor when you are going through a life event. The advice will allow you to consider all aspects and make the best decisions for you and your family. This includes considering tax implications, your personal investment strategy for the future, protection against the risks of disability and illness, and finally taking care of your loved ones every step of the way.