By Sherwin Govender, 9 June 2020
However, there is a new trend on the rise – financially desperate people resigning from their jobs without new ones lined up, just so they can access the money saved in their pension funds.
Sherwin Govender, Business Development Manager at Glacier by Sanlam, weighs in on this scary development and examines its related financial dilemmas.
It seems logical, especially in light of the current unemployment statistics – if you have a job, try not to lose it. According to Stats SA, the unemployment rate was around 29.1% in the third quarter of 2019. Some argue that it’s closer to 36%, which equates to around 10 million working-age South Africans.
Nobody knows for sure what the actual count will be in 2020 in the context of COVID-19. As a result of the pandemic, the subsequent market turmoil in its wake, and the unrelated investment downgrade that followed, many industries in South Africa will shrink this year. It is likely that many companies in those industries will close and thousands of jobs will be lost. These numbers provide a stark reminder that jobs are scarce and finding a new one will not be easy if you lose the one you have.
When you resign from your job, you are allowed to cash out the total of the savings accumulated in your employer’s pension fund, but you will pay a hefty sum in taxes. The tax laws around cashing out your pension fund are in place to dissuade you from doing so, and with good reason.
You may be financially desperate, but here is a summary of why you need to stay put in the job you have, and step away from your pension fund: