A preservation fund is a type of pension fund that enables investors to preserve their withdrawal benefits until retirement age. There are four differences between a retirement annuity (RA) and a preservation fund:
- Monthly ongoing contribution: with a RA you can contribute on a regular basis, but not with a preservation fund. Your preservation fund will only accept transfers from other funds.
- Withdrawal benefit before retirement: you cannot withdraw your benefits from an RA (unless you emigrate) before retirement (the minimum retirement age is 55). You can make one full or partial withdrawal from your preservation fund at any time before retirement.
- Retirement benefits: you can elect to receive your entire fund balance as cash if you are member of a provident preservation fund but you can elect to receive only one-thirds as cash if you are a member of a RA or pension preservation fund (you must buy an annuity with the other two-thirds).
- Costs: the cost of investing with a preservation fund is generally lower than with a RA.
The information and answers supplied in this section do not constitute advice as defined by the Financial Advisory and Intermediary Services Act, 37 of 2002.
