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Pension and provident funds

It is very important to save money for your old age when you have retired and will no longer be earning a salary.

Pension and Provident Funds

Pension and Provident Funds must register with the Financial Services Board. They must also be approved by the South African Revenue Services (SARS), because an employee can get tax benefits for contributing to a pension fund.

Your employer may have a pension or provident fund that you contribute to for your retirement. If you leave a specific employer before you retire, your contributions will be paid back to you, with some interest. Your monthly deduction for this contribution will be a percentage of your gross salary.

If you contribute to a pension fund, you will receive a pension on retirement. A pension works the same as a salary: it is a regular amount every month. You may also decide to receive one third of your pension benefit as a single amount (also called a lump sum) and receive the remaining two thirds in the form of a monthly pension.

You may also contribute to your own pension fund, into which your employer may pay a percentage of the contribution each month. This type of private pension fund is called a retirement annuity.