Paballo Mphana, Employee Benefits Consultant at 10X Investments, spoke to BusinessTech about some of the common mistakes South African employees make regarding their retirement plans.<\/p>\n
Mphana explained that many employees incorrectly assume that their business\u2019s retirement contribution is sufficient to meet their retirement goals.<\/p>\n
\u201cWhen individuals join a new company and are added to a pension or provident fund, most of them don\u2019t look at its intricacies, not even what it is and what returns it offers,\u201d said Mphana.<\/p>\n
\u201cThen, once we start talking about retirement with clients who are about five years from the end of their working life, they realise they don\u2019t have enough money saved up.\u201d<\/p>\n
Employees should remember that your employer doesn\u2019t know what your retirement goals are. They also might assume your corporate fund is not the only way you\u2019re saving for retirement.<\/p>\n
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.<\/p>\n
Mphana added that the role of employee benefits consultants is important too.<\/p>\n
\u201cThey 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.\u201d<\/p>\n
10X also offers a collection of free, downloadable ebooks outlining various aspects of saving for retirement.<\/p>\n
Download 10X Investments\u2019 free e-book to help you make the most of your corporate fund membership.<\/strong><\/a><\/strong><\/p>\n \u201cSouth 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,\u201d said Mphana.<\/p>\n Mphana recommends that employees who want to know more about their current retirement fund get in touch with their HR department.<\/p>\n They can also use online tools like the 10X Retirement Calculator<\/strong><\/a><\/strong> to compare how their current investment strategy fits in with their retirement goals.<\/p>\n \u201cMany people are shocked when they see how far they are behind on their retirement goals,\u201d said Mphana.<\/p>\n \u201cThe sooner they come to this realisation, the easier it is to get them back on the right path.\u201d<\/p>\n She also highlighted that many people were unaware of the major tax incentives that come with investing in retirement funds.<\/p>\n \u201cYou can claim tax relief on contributions too (up to the lower of 27.5% of taxable income or R350,000 per annum),\u201d said Mphana. \u201cThe 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.\u201d<\/p>\n Another big mistake that many corporate fund members make is that they cash out their savings when changing jobs.<\/p>\n \u201cNot 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,\u201d explained Mphana.<\/p>\n She added that employees who are leaving a job can ringfence all (or at least some of) their savings as well as the tax benefits, by transferring their savings to a new employer\u2019s retirement fund, or to a preservation fund with a company like 10X.<\/p>\n For more information on your choices when leaving an employer, download 10X\u2019s free ebook on what to do with your retirement savings when changing jobs.<\/strong><\/a><\/strong><\/p>\n Mphana stressed the importance of employees educating themselves and engaging with the retirement savings process because \u201conly you are responsible for ensuring that you have a decent retirement\u201d.<\/p>\nTake control of your retirement future<\/strong><\/h3>\n
What to do when changing jobs<\/strong><\/h3>\n