Saving for retirement is a very important part of your savings journey, and becoming a member of a retirement fund is an excellent way to prepare for the future. Every month you and/or your employer will make a contribution to the fund, on your behalf, which is then saved for your retirement. It’s simple, it’s effortless and it’s one of the most secure ways to ensure a secure and comfortable retirement.
Find out how much you need to save.
Learn more about preserving your retirement savings.
Find out more about caring for your dependants.
Get all the answers to your fund-related questions.
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Saving for retirement is a concept that most people only start thinking about when it’s almost too late. In earlier stages of life, your focus might be on accumulating assets like a house or car, and most of your money is probably spent on education, food and holidays. The problem is, when retirement comes, you’ll need at least 20 years’ worth of income in your pocket to have any hope of retiring comfortably.
After working for 10 years, you should have saved at least double your annual salary – that’s not a small amount. Use the table below to find out how much you should have at the different stage of your life, or use our Retirement Calculator for a more detailed calculation.
Download more information on retirement investments.
There might come a time in your life when your retirement savings pays out, whether it’s due to a career change, disability or other occurrence. While it’s certainly tempting to use the lump sum to pay off your bond, car, debt and other loans, it can be detrimental to your future. Making up the loss in the long term is not going to be an easy task, not to mention the fact that you’ll have to compensate for the growth lost. Make the smart choice, and preserve your money instead – that way you won’t have to pay tax and your money will keep growing.
Download more information on preserving your savings.
As a breadwinner, it’s your responsibility to ensure that your loved ones are taken care of when you are no longer around. When you die, your retirement fund savings will be paid out – however, in order to ensure that your dependants receive the money you will need to nominate them as your beneficiaries.
In order to inform trustees of your pension or provident fund who your beneficiaries are, you will need to complete a beneficiary nomination form. This will provide the trustees with the information they need to allocate your available fund death benefits as fairly as possible. Once you’ve completed a beneficiary nomination form, it’s important to keep it updated – especially in case of divorce, the birth of a child or other big life events.
Download more information on how to do this
New tax regulations from 1 March 2015 gives retiring members the opportunity to postpone payment of their retirement benefit until a later date than the retirement date indicated in the rules of the fund. You may choose to retire from the fund on a date on or after the ‘normal retirement age’ as prescribed by the fund rules.
Your monthly contributions are invested either as per your employer’s default investment strategy or in accordance with your own instructions, provided that your fund option allows member investment choice. Each investment strategy has one or more underlying investment portfolio. Download more information on retirement investments.
Your member share represents your accumulated value in the Fund. It is the sum total of all amounts transferred from other funds (if applicable), all the contributions you or your employer have made, less operating expenses of the Fund and all the costs of insured benefits, plus the investment returns earned.
When you invest money, it earns interest. Soon after, your initial investment plus the interest earned will now earn interest – in other words, you receive interest on your interest. This is known as compounding – a powerful tool that can help you grow your money over time.
The bottom line is: the sooner you start investing, the harder compounding will work for you.
Year one: You invest one rand. You earn 10% interest on it. After one year, your rand will be worth R1.10.
Year two: Your R1.10 earns 10% interest. At the end of year two, your R1 investment is now worth R1.21.
In the first year, you earned 10c, but in the second year you received 11c – in other words, you earned interest on your interest, or compound interest. Compounding gets even more radical for share investors: you can re-invest dividends to buy new shares, which will then also pay dividends, which can then be re-invested to buy even more shares which will pay dividends, and so on.
Compounding has a dark side – however it will only work against you if you borrow money. The interest charged on your credit will earn more interest, quickly snowballing into a massive debt.
When you withdraw from the fund, for instance when you resign, are dismissed or get retrenched, you will have the following options with the benefit that pays out:
The fund may have to make one or more deductions from the benefit depending on whether it is transferred to another retirement fund or paid out in cash.
Retirement fund investments are not taxed. This means you can accumulate much more money for your old age in a retirement fund than in another investment, whether it’s an annuity or a unit trust. If you save the same amount of money in your retirement fund as you have saved in of another investment, you can almost practically double your retirement income. Your savings cannot be touched irrespective of future financial loss you may incur.
No tax is payable if you transfer your benefit to a new employer’s pension and/or provident fund, a retirement annuity fund and/or a pension preservation fund or provident preservation fund. Note that although the withdrawal benefit is taxable income in your hands, the amount transferred to another fund is tax deductible and no tax is therefore payable. Tax is however payable where the transfer is from a pension fund to a provident fund.
Benefit paid out in cash
Withdrawal benefits taken in cash are taxable according to the withdrawal tax table of the Income Tax Act.
According to the Divorce Act, your pension fund, provident fund, retirement annuity fund or preservation fund will be regarded as assets in the case of divorce. Sections of the Act may therefore allow your ex-spouse to get a portion of your retirement savings.
Then again, a Divorce Order must meet certain requirements before an ex-spouse can have any claim on your savings. Your former spouse will also need to submit certain documentation if they were to claim from your retirement savings.