Financial issues to consider when making a career move

CHANGING JOBS is a major life event, but just how disruptive it can be depends on how many loose ends you tie into a neat bow before you leave your employer.

One of those loose ends? Finances.

Remember those retirement fund contribution forms and risk cover beneficiary forms you had to complete when first joining your employer?

Well, neatly consolidating the impact of your departure on these can mean the difference between sailing straight into your next chapter with peace of mind … or being caught in a financial nightmare.

Two experts offer some pointers and surprising insights for navigating this life change so you can rest assured your finances are handled.

Going solo with retirement savings

Going independent, there’s the option of transferring your existing savings into a preservation fund or retirement annuity (RA), which comes with unique tax benefits, or withdrawing those funds in cash, which experts tend to advise against because of the tax implications, among other things.

Transferring to your own retirement product comes with a few advantages, depending on how involved you would like to be in the planning.

“It allows you the freedom of choice in terms of product provider or platform, as well as many more fund choices and the flexibility to make changes when you want to,” says Sonja Linde, a Certified Financial Planner (CFP) at Insync Financial Services.

That flexibility includes the option to contribute a certain amount (perhaps more than what an employer would have allowed), and being able to pause and resume contributions more flexibly.

One thing to watch out for is the fees attached to individually holding such a retirement product.

So, what steps can you take to put this in action?

As soon as you’ve handed in your notice of resignation, speak to a CFP about the product best suited to your needs, and once a solution has been chosen, and investment opened, ask your HR representative for the withdrawal claim form for a transfer of funds to the new product.

Also, ask for written confirmation of this transfer once submitted, and ensure that the deposit has been made into your new investment.

Moving savings to your new employer

Again, there are advantages and disadvantages

to this. “The fees and costs payable via a group retirement fund are often much cheaper than through an individual product,” notes Linde.

“If the new employer has a similar fund, it would make sense to transfer the [savings] to it, as you can continue with your [contributions] without interruption.”

With this route, you are limited with the involvement you can have in the type of fund choices on the new retirement funding platform.

“Or the funds could be poorly managed funds, meaning they may not provide adequate returns, which could severely impact the outcome at retirement,” she says.

A withdrawal claim form gives you the option to furnish the details of the new employer fund you’d like your savings to be transferred to.

What about risk cover?

When his clients share that they are leaving an employer with whom they’ve had group risk benefits, and are now going solo, independent wealth planner Lloyd Ellis at Solutions 2 Wealth discusses the option of replacing the previous cover with risk cover in their own name.

“We also look at whether they can afford the same or similar benefits completely out of their own pocket,” he says, since group risk cover typically comes at a lower monthly premium than those of retail products.

Linde adds that it’s worth asking about a conversion option for your group benefits, as employers often fail to mention this.

“This will allow you to convert the same benefits to an individual policy (at the same insurer) with minimum medical underwriting, which could be beneficial especially if you have developed medical conditions that might make it difficult to qualify for cover at standard rates,” she says.

Even if you are moving to an employer that offers group risk benefits, go in with eyes wide open.

“In such a scenario, I ensure we do a full comparison of the previous benefits against the new benefits to make sure my client is aware and understands any changes that will be implemented, and how this will impact their financial planning positioning going forward,” Ellis says.

He adds that this assessment is also critical for ensuring you are neither under- nor over-insured. Medical aid should also be a part of the risk cover discussion.