This week, we take a look at what you need to do when moving a retirement product from one provider to another
08 September 2022 - 05:00
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I have a question about moving retirement products between providers. Is there a cost-effective solution that does not involve selling underlying assets and buying with the new provider? I want to minimise costs. Is it better to just leave it where it is and start investing anew with a different service provider?
— Fat Wallet community member
Moving a retirement product is an easy, albeit potentially lengthy, process and need not involve selling underlying assets at all.
First, request a section 14 quote from your current provider. This quote will detail the value of the funds and highlight any penalty it may be charging. The penalty may seem scary, but if the new provider is offering a lower-fee product, you could make up that penalty fairly quickly in saved costs.
Ideally a retirement product fee should not be much more than 1% annually in total, with some providers even offering a fee of 0.2%. With the section 14 quote you find your new provider, open the account and request the transfer process, which the provider will largely manage. Now you wait.
Selling out of the products within the existing product will probably entail a cost, but this will be included in the quote, as will entering the products at the new provider. Also, as it’s a transfer from one regulation 28 structure to another, you won’t have to pay capital gains tax on the underlying assets sold. It should all happen fairly quickly — though in some cases it can take up to six months.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
READER QUESTION OF THE WEEK
YOUR MONEY: How do I move my pension?
This week, we take a look at what you need to do when moving a retirement product from one provider to another
I have a question about moving retirement products between providers. Is there a cost-effective solution that does not involve selling underlying assets and buying with the new provider? I want to minimise costs. Is it better to just leave it where it is and start investing anew with a different service provider?
— Fat Wallet community member
Moving a retirement product is an easy, albeit potentially lengthy, process and need not involve selling underlying assets at all.
First, request a section 14 quote from your current provider. This quote will detail the value of the funds and highlight any penalty it may be charging. The penalty may seem scary, but if the new provider is offering a lower-fee product, you could make up that penalty fairly quickly in saved costs.
Ideally a retirement product fee should not be much more than 1% annually in total, with some providers even offering a fee of 0.2%. With the section 14 quote you find your new provider, open the account and request the transfer process, which the provider will largely manage. Now you wait.
Selling out of the products within the existing product will probably entail a cost, but this will be included in the quote, as will entering the products at the new provider. Also, as it’s a transfer from one regulation 28 structure to another, you won’t have to pay capital gains tax on the underlying assets sold. It should all happen fairly quickly — though in some cases it can take up to six months.
— Your Money team
Send us your questions to yourmoney@fm.co.za
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