Retirement Savings
Pension
A pension fund is a fund set up by an employer for the benefit of its employees. The object of this fund is to provide annuities or pensions for the members (employees) upon their retirement, or to provide lump sum benefits for the dependents of such members upon death of the members.
Provident funds
A provident fund is a fund set up by an employer for the benefit of its employees. The object of this fund is to provide a cash lump sum benefit for the members (employees) upon their retirement, or to provide lump sum benefits for the dependents of such members upon death of the members. With the new retirement reform of 2016 all new contributions to provident funds will be handled as normal pension pay out. This has been extended for another two years.
Retirement annuity
Retirement annuity fund is set up by an administrator or insurer for the benefit of individual investors. The object of this fund is to provide annuities or pensions for the members upon their retirement, or to provide lump sum benefits for the dependents of such members upon death of the members. No employer/employee relationship is therefore required. If one is a member of a retirement annuity fund, one cannot retire before the age of 55. Retirement annuities are often used as a retirement savings vehicle by self-employed people and by those wishing to make additional provision for retirement.
Facts and advantages
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Can contribute up to 27.5% of your taxable earnings to a maximum of R350 000 per year
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Premiums are tax deductible
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No interest tax or capital gains taxed are levied against the fund
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Pays out at the age of 55
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Pays out 1/3 Cash and 2/3 as a annuity
Preserver Funds
A preservation fund is a pension preservation fund or provident preservation fund to which a member’s paid-up pension or provident fund benefits respectively can be transferred in certain instances. It not only preserves the member’s accrued tax status, but generally also allows the member one withdrawal prior to retirement.