There are a number of factors to consider when you compare these options:
- Paying off your bond sooner provides a tax-free return equal to the interest rate payable on the bond. To evaluate the return on this investment, you should compare the interest rate you are paying on your bond with the investment return you would expect to earn in the new Provident Fund.
- Taking the Provident Fund lump sum in cash will have tax implications, compared to transferring it to a new Provident Fund or a Preservation Provident fund.
- The additional monthly payments into the new Provident Fund may cause the total contribution to exceed the amount you can get tax relief on.
- If you do decide to pay the Provident Fund lump sum into your bond, you must make sure that you remain disciplined in paying the excess into your new Provident Fund or a Retirement Annuity.
A registered financial advisor will be able to help you compare the available options, taking into account the tax implications and determining the most appropriate solution for your specific circumstances.
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