Unlike previous generations, today’s workforce is comprised of professionals whose career path and development throughout their working life, see them take on several work engagements with multiple employers.
As such, it is critical that those who take this approach, pay close attention to their pension planning, especially in the context of the funds accumulated by participating in multiple company plans throughout their professional career.
Sagicor Life Inc’s Vice President – Pensions, Stephen Robinson, made the point that older individuals and previous generations were known for staying at one company for the majority or all their working life, leading to years, and in many cases decades, of pension fund accumulation in preparation for their retirement years.
“The same does not apply for today’s generation. The average time spent at a company by young professionals continues to drop as these individuals pursue new opportunities from one company to another.
The result is that these professionals are presented with a choice of what to do with the pension funds they’ve accumulated at the company they have left, and this is where they need to make deliberate decisions and be smart,” he said.
Robinson explained that there are a few options available to individuals when switching companies. “If the organization that you’re moving to has a pension plan, then there’s the option to transfer what you’ve accumulated in the past to the new company’s plan. Alternatively, they can set up their own personal plan with those funds, allowing them to save on their own, in addition to the plan they’ve joined at the new company.”
“By choosing either of these options, individuals are adding to their retirement savings and ensuring that their golden years are not disadvantaged by their pursuit of career development”, Robinson said.
However, the pension expert made the point that a common mistake made by a lot of individuals was that of choosing to spend those accumulated funds when they’ve moved on from a company.
“Many individuals give in to the temptation to convert these accumulated funds into spending, then when they get to a later stage in life, they are faced with the reality that they have not saved enough for their retirement years.”
Robinson conceded that in some instances these accumulated funds come in handy for individuals who might be going through a rough patch or need a short-term capital injection for one reason or another. However, he strongly suggested that this be a last resort.
The result is that in many cases individuals find themselves under pressure during the latter years of their working lives to save as much as possible to ensure they can live comfortably without their pre-retirement income.
“Therefore, instead of coasting for the last 10 to 15 years prior to retiring, they find themselves scrambling to either build up a pension with their final employer, or starting their own personal fund to deposit as much as they can in that timeframe,” Robinson said.
(PR)
