I know I need to save for retirement - what are my options?
There are many ways to invest to secure your financial future in retirement. The three most common vehicles are pension funds, provident funds and retirement annuities. Learn the differences between these options.
It sounds obvious, but the easiest way to save for retirement is through vehicles expressly designed for retirement planning. The three most common savings vehicles are pension funds, provident funds and retirement annuities. All three aim to encourage you to regularly contribute towards retirement savings that you can access when you retire.
This could potentially spare you from being fully dependent on your family or the government one day, or being forced to keep working for as long as you live. So think of retirement savings products as the best friends of your future self.
Well-designed vehicles help you save for retirement
Government understands the importance of saving for retirement. That's why contributions to retirement savings products are tax-deductible (up to certain limits) and investment growth in them is tax-free.
This means that saving in retirement vehicles can lower your income taxes right now. Pensions or lump sums are only taxed once paid out. To understand the tax implications of your situation, contact a tax specialist or financial adviser.
Here's a list of the different retirement vehicles you can use to save for retirement:
- Pension fund: This is a workplace-based plan so you need to be employed by an employer that offers a pension fund to join.
- Provident fund: This is a workplace-based plan so you need to be employed by an employer that offers a pension fund to join.
- Retirement annuity: Anyone can contribute to a retirement annuity. You can be employed, may already belong to a pension or provident fund or be self-employed. It serves as a separate, personal retirement savings vehicle.
In terms of South African law (specifically, the Pension Funds Act) you cannot access your total investment value in retirement annuity funds before the age of 55 unless under exceptional circumstances. These exceptions include if you become disabled or emigrate from South Africa. You may be able to access some of your pension or provident fund if you leave your employer, but it is strongly recommended that you invest in a preservation fund instead of cashing out.
Following the implementation of the two-pot retirement system on 1 September 2024, the investment value of all retirement funds have been split into the following components:
- Vested component
- Savings component
- Retirement component
These components have different rules in terms of how much you can withdraw. Learn more.
This document is meant only as information and should not be taken as financial advice. For tailored financial advice, please contact your financial adviser. Discovery Life Investment Services Pty (Ltd): Registration number 2007/005969/07, branded as Discovery Invest, is an authorised financial services provider. All life assurance products are underwritten by Discovery Life Ltd. Registration number: 1966/003901/06, a licensed life insurer, an authorised financial services provider and registered credit provider, NCR registration number NCRCP3555. All boosts are offered through the insurer, Discovery Life Limited. The insurer reserves the right to review and change the qualifying requirements for boosts at any time. Product rules, terms and conditions apply.
Secure your financial future through our wide range of investments
We know that not everyone is at the same stage in their lives and everyone has their own reasons for investing. That's why we have designed products to meet your needs, whatever stage you're at. So, tell us about yourself so you can consider investments that are relevant to you.
