Question:
I am changing my current job and accumulated debts of around R50 000. I belong to a pension fund and a provident fund which have R150 000 and R167 000 in them respectively.

What is the tax implication if I cash out from both funds? I need to clear this debt, but at the same time re-invest what remains. Can you advise me?

Answer:
First sit down and look very closely at your spending before 'raiding' your pension or provident fund. This is the base of your retirement and you will need multimillions!

If you are moving to another company that has a pension plan, move this money into a unit trust linked preservation plan that is set up by an independent financial advisor. You can find an advisor in your area by visiting the Financial Planning Institute's website (www.fpi.co.za).

If you are moving to a better job, you could put the credit card 'on ice' and slowly pay off the balances. If this doesn't work you can take one withdrawal from your preservation fund before you retire, but I don’t recommend that.

Bear in mind this will be taxed at your marginal rate.