WHEN YOU CAN NO LONGER FIND A JOB?
Irecently lost my job and now that I am 50 years old, my chance of getting another job is very slim. I would like to know what happens to my retirement annuity (RA). Will I lose all the money I paid in? Will my money still grow and will I be penalised for not contributing?
What happens to your RA, do you lose all the money paid? The RA is your accumulated savings, so the amount will just stay invested until you are able to start withdrawing the proceeds. This can happen legally from age 55 or later (or on earlier disability) when the money is transferred to an annuity to provide an income for you in retirement.
The RA value will grow in line with the type of investments you choose. Do your benefits get penalised or are you still going to have your benefits?
The benefits remain yours. There are structures across the industry where there may be a fee that is levied against your built-up RA fund for stopping your regular contributions if you had originally contracted to keep them going until your retirement date.
Usually the reason for this is because the company may have paid commission to your financial adviser based on the length of time you planned to contribute and stay invested.
Based on your planned investment term, the company can afford to pay this to your adviser because of the fees it expects to earn.
If you now change this and contribute for a shorter period or contribute less, then there could be a fee against your fund in order for the company to recover its initial outlay. Must you notify the company that you are out of job and battling to find another job?
If you are unable to make your monthly payments, you must ask for the debit order to be stopped so that you don’t have bounced debit orders.
Some RA policies include retrenchment protection, which will pay your premiums for a few months. In that case, it is important to inform them if you have been formally retrenched. If you get a new job, do you continue with the existing RA or do you have to start a new RA?
Depending on the structure of RA that you chose, there may be different rules on stopping and starting your contributions up again. Generally, you can continue in the same RA.