02 Nov Pension Fund
This is an investment vehicle established by a company to assist it’s employees in saving for retirement.
- Contributions are tax deductible.
- First R500 000 withdrawn is tax-free (at retirement).
- Power of compound interest to grow money for retirement.
- Only have access to 1/3 as a lump sum at retirement.
- If you want to withdraw before retirement you need to leave your job and are liable to pay higher tax then you would at retirement.
- Often people don’t account for the tax payable at retirement when considering their financial planning.
- Limited investment options (your company will usually only provide a small list of possible investment options which usually also have high fees).
- Make sure to adjust your pension fund depending on how close you are to retirement. You want to be in the riskier portfolio while you are young and the convert to a more conservative portfolio when you are closer to retirement age
- Explore Tax-Free savings investments before you consider increasing your pension fund contributions
- Most people start saving for retirement too late. Compound interest works better the earlier you begin saving. Even R50 makes a difference over the long run.
(NOTE THIS IS JUST FRIENDLY ADVICE AND IS NOT ADVICE GIVEN BY AN ACCREDITED FINANCIAL SERVICES PROVIDER)