While saving for retirement on a regular basis and throughout your career is very important, preserving your funds when changing employers should also be right at the top of your list of retirement savings do’s.
The simple principle: You work so that you can provide for your family and your lifestyle, and you save so that you will have an alternative source of income to continue providing for them when you are no longer working.
One of the biggest problems in South Africa is people cashing out their accumulated retirement savings when resigning from a job.
A 2015 survey found that two-thirds of people leaving their jobs cash out their retirement savings, and many of them use the money to pay off short-term debt. The long-term impact of this can be catastrophic.
When changing jobs, you can preserve your savings and become a paid-up member of the fund and continue to enjoy the superior investment returns of the Fund. Click here to find out more about the paid-up option.
Why it is in your interest to preserve your savings
Let’s assume a 35 year old person who earns R15 000 joins the Fund on 1 May 2021. The figure below shows the contributions less the risk options chosen. In total the member saves R3 269.16pm. Please note that this is only an example, the actual rates for the insured benefit will change from time to time and the rates used in this example cannot be relied on.
Let’s assume further that the member works for 30 years, receives no annual increase and receives 7.5% in investment returns. The table below shows the growth
The red is the return on investment while the orange are the monthly contributions paid. The great Albert Einstein once said, “Compound interest is the eighth wonder of the world.” However note how long it takes for this wonder to kick into gear. After 10 years the interest earned would total R189 383.56 but after 20 years the interest would grow by 5.4 times to R1 025 635.94 and after 30 years by 17 times to R3 228 117.08.
If after 10 years you resigned and take your cash of R581 682.76 to pay debts and a new car, you would have to start the process all over from point 1. Let’s now assume you start new employment and work there to 20 years and retire. Your retirement benefit will be R1 810 234.34 whereas if you kept your savings your retirement would be R4 405 014.68. To take R581 682.76 in withdrawal benefits you sacrificed R2 594 780.34 in retirement savings! Preservation is the best option.

You must be in it to win

On page 3 of the December 2022 Member Newsletter, we announced a competition, where you could win a prize.

All you need to do is have your photo taken next to the Fund’s calendar and/or poster and send it to us. The competition closes on Tuesday, 31 January 2023.

Please send the photo to:

Email: [email protected]

WhatsApp: 081 778 0923

When sending in the photo, please tell us your name, your pension number or identity number and which municipality you work at. Please note that subject to the discretion of the Fund, all or some of the pictures submitted, may be published on the Funds’ website and/or on the Funds’ Facebook page.

Hurry to enter the competition, your photo could win the prize!