What should I consider before transferring to a preservation fund?
While preserving your retirement benefits is always the preferred option, these are uncertain times and many people may have no option but to withdraw their money in order to survive. Deciding what to do with your retirement benefits involves careful consideration, taking into account the tax implications, your short-, medium- and long-term needs, your investment horizon, and your chances of re-employment in the near future.
If you are concerned that you may be unemployed for a while or may need access to your capital before retirement, a preservation fund may be a better option than a RA as it allows you a once-off withdrawal before age 55. If you are confident that you will not need the capital before retirement, then a RA could be a suitable option, especially if you continue to make regular contributions towards the RA.
On the other hand, if you are in financial distress, you may want to consider withdrawing up to your tax-free limit and then investing the balance into a preservation fund. As always, it is advisable to seek the advice of an independent adviser before making a decision.