Question:
I have resigned and am leaving a large corporate at the end of the month. One of the options stated to me by the company is that I could continue as is, i.e. leave my provident fund with the company's scheme (only available if you were employed by the company for more than 10 years and exceed a certain fund credit). However, my financial advisor says that the law prohibits this. Can I leave my money with my company's provident fund and move it at a later stage into a provident preservation fund once I've had more time to consider my options?
Answer:
Zelda,
The rule is that when you leave your employer, you must leave the employer's retirement fund; if you don't, you are disinvested into cash after six months, and transferred to an unclaimed benefit fund after two years. Some company funds do have a preservation fund attached, so you would probably be transferred to that. Moving your money to a preservation fund does not impact your options - you are still allowed to make one partial or complete withdrawal from the fund at any time before your retire (earliest age 55).
The more critical issues are that you may incur a transfer cost (broker commission) on moving to a preservation fund, that you may pay higher fees than before and that you may choose an inappropriate asset mix. But there are options in the market (such as the 10X Preservation Funds) which do not charge transfer/entry fees, which are low fee (no more than 1.03% of asset per annum, but reducing depending on the fund balance) and which automatically provide you with an age-appropriate asset mix.
