People should avoid cashing in or withdrawing their pension or provident funds when they resign from work.
Some people even retire early just to get money to pay off their debts.
Please, just avoid this idea if you want to enjoy your hard-earned savings after retirement. Many people access these options without fully understanding the effects that early withdrawals will have on their financial position later in life.
Not only are they reducing the fund benefits they’ll enjoy when they retire, but many retirement fund members are unaware of the tax implications involved.
Most people are aware that any withdrawal taken will be taxed, but not everyone fully understands the impact of the withdrawal on tax at retirement.
All lump sums received from a retirement fund are either taxed as a withdrawal benefit or a retirement benefit.
South Africans should be encouraged not to cash in their pension or provident funds when they resign from work.
The best option is to save the money in a preservation fund.
Financial education is important so that people can make wise decisions about their pension or provident funds. People, you will reduce your retirement benefit if you use your once-off withdrawal option. Just leave it to mature and it will be there for you in the future.
Nelson Kgatla, Pretoria North
Good advice. Early financial planning for retirement does help, and there is no need to withdraw the money early and pay a hefty tax bill. This letter wins R200. Call Nthabiseng to collect. – Editor
