Preservation Funds

A preservation fund may suit you if:
1. You want to preserve your provident or pension retirement savings.
    Specifically when you change jobs, are retrenched or your employer closes shop;
2. You receive a pension interest in a divorce order. 

The transfer to the preservation fund is tax-free.
This means you keep the tax benefits of the original fund.

It makes sense to preserve. Compared to taking a cash payout.
A payout causes much harm to your retirement savings. 
Not only will you have to start over.
Also, you will miss out on the full power of compounding growth.
Further, the cash payout reduces your tax-free benefit at retirement.

A preservation fund allows you to invest in unit trusts.

Your contributions are allocated as follows:
One-third to the savings component; and
Two-thirds to the retirement component of your account.
(The two-pot retirement system)

You may nominate beneficiaries.
No estate duty payable.

Protected from potential creditors:
You cannot transfer or pledge your preservation and,  
You cannot use your preservation fund to secure a loan.

Withdrawals before retirement:
You may access the savings component only.
Limited to one withdrawal per tax year.
You may not withdraw from your retirement component.
It must be preserved until retirement.
But, you may make a once-off partial or full withdrawal from your vested component.
Consists of your accumulated investments up until 31 August 2024. Plus, growth.

Beware – withdrawals are taxed.

At retirement (the earliest age 55):

Savings component.
You may take the balance in cash.
Or use it to purchase a retirement income product.

Retirement component.
You must use the full value to purchase a retirement income product. Such as a living annuity or a guaranteed life annuity.

Vested component.
Consists of your accumulated investments up until 31 August 2024. Plus, growth.
You cannot make additional contributions to your vested component.
Your previous rights continue to apply to your vested component.
Your vested component is not impacted by two-pot.
You may take one-third maximum in cash.
The balance must be used to purchase a retirement income product. Such as a living annuity or a guaranteed life annuity.

You may access your preservation fund before 55 if:
You are permanently disabled
You emigrate

Again, the transfer is tax-free and it makes sense to preserve for further growth.