Funding your retirement is your job, not your employers’

Paballo Mphana, Employee Benefits Consultant at 10X Investments, shares some of the common mistakes South African employees make regarding their retirement plans.

Mphana explained that many employees incorrectly assume that their business’s retirement contribution is sufficient to meet their retirement goals.

“When individuals join a new company and are added to a pension or provident fund, most of them don’t look at its intricacies, not even what it is and what returns it offers,” said Mphana.

“Then, once we start talking about retirement with clients who are about five years from the end of their working life, they realise they don’t have enough money saved up.”

Employees should remember that your employer doesn’t know what your retirement goals are. They also might assume your corporate fund is not the only way you’re saving for retirement. It is your responsibility to understand your corporate investment, how it is performing, if it will be enough and, if not, how much more you need to invest to reach your retirement goals.

Mphana added that the role of employee benefits consultants is important too. “They play a vital role in ensuring members understand their corporate funds. 10X Investments, for example, ensures that members are educated and informed about their retirement products by offering yearly member sessions to corporate clients.”

“South Africans, in general, really need to start saving earlier, and into the right funds to ensure they are well set up for life after work,” said Mphana.

Take control of your retirement future

Mphana recommends that employees who want to know more about their current retirement fund get in touch with their HR department. They can also use online tools like the 10X Retirement Annuity Calculator to compare how their current investment strategy fits in with their retirement goals.

“Many people are shocked when they see how far behind they are on their retirement goals,” said Mphana. “The sooner they come to this realisation, the easier it is to get them back on the right path.”

She also highlighted that many people were unaware of the major tax incentives that come with investing in retirement funds.

“You can claim tax relief on contributions too (up to the lower of 27.5% of taxable income or R350,000 per annum),” said Mphana. “The more you contribute towards your retirement the less tax you pay. This makes investing in your retirement one of the most efficient ways to save.”

What to do when changing jobs

Another big mistake that many corporate fund members make is that they cash out their savings when changing jobs.

“Not only do they have to start saving again from scratch, but they lose out on the growth that those savings would have generated in the years before they retired, which is often a very significant loss,” explained Mphana.

She added that employees who are leaving a job can ring-fence all (or at least some of) their savings as well as the tax benefits, by transferring their savings to a new employer’s retirement fund, or a preservation fund with a company like 10X.

Mphana stressed the importance of employees educating themselves and engaging with the retirement savings process because “only you are responsible for ensuring that you have a decent retirement”.