Tag: Pension fund

By Tokiso TKay Nthebe As a member of a retirement fund, the responsibility to retire with enough savings lies with you. To achieve the desire retirement savings target, you need to contribute at least 15% of your monthly income and ensure that these contributions are paid to retirement funds and invested timeously. Sadly, many members of retirement funds leave the responsibility to retire with sufficient savings to their employers. In this article, I discuss how non-payment of retirement contributions by employers to retirement funds can negatively impact your retirement savings, resulting in insufficient money when you reach your golden years. What are employee benefits? Employee benefits which include retirement and risk benefits help you as an employee to achieve your financial goals. Retirement benefits are among an employee’s biggest assets because they provide financial security and income post-employment, while risk benefits which include group life assurance (GLA) and disability cover provide additional income should you pass away or get disabled while still in the workforce. As such, it is essential that these assets are safeguarded and invested correctly to ensure that they grow and earn good returns to provide security for members when they retire. Employers should therefore remit your retirement benefits to the pension or provident funds on time. Is your employer paying your retirement contributions timeously? A trend within the retirement fund industry that is worrying is the non-compliance by employers who deduct retirement contributions on behalf employees but do not remit these to retirement fund administrators. When these contributions are not paid to retirement funds and invested, the consequences for members are dire. As such it is important for employees or members of retirements to ask questions and not leave their retirement planning to chance. How does this impact you as a member? Firstly, pension regulations require employers to pay retirement contributions within a prescribed period. Section 13A of South African Pension Fund Act of 1956 or Section 29 (1) of the Lesotho’s Pension Fund Act (PFA) of 2019 for example require that contributions are paid to pension fund administrator within a period of seven days. When these contributions are not paid timeously a member is disadvantaged in many ways, for example: Loss of investment returns (growth): When you contributions aren't invested as quickly as possible, the member loses out on the compounding effect where the money starts earning interest on interest and thus growing. The risk of retiring with insufficient capital: When employers consistently deduct retirement contributions but aren't invested, the these delays negatively affect the growth of the savings in the long term. Members are therefore at the risk of retiring with lower retirement capital. Lower pension annuity income: Due to a reduced or lower capital at retirement, this will also impact the member's pension annuity income. The retirement capital is used to purchase annuity, a post-retirement income that helps members take care of their daily needs. Opportunity cost: When retirement contributions are not invested on time, members may miss the opportunity to gain better returns when financial markets are favourable or experience negative returns when the delayed contributions are eventually invested. What can members do? As a member of retirement fund, I encourage you to take control of your finances, including your retirement savings. Educate yourself, review your affairs regularly and ask questions to ensure your retirement assets are protected. Regularly check your pension benefit statement to ascertain that contributions are up to date. Learn your fund rules and familiarise yourself with the relevant pension laws and regulations. Attend sessions, webinars or seminars hosted by the administrator or fund managements who manage your fund. Remember that the responsibility to retire with sufficient capital lies with you. I cannot emphasise how important it is for members to take ownership of their retirement planning and to hold their employers and administrators accountability to ensure they retire comfortably. For more information, visit your Fund’s administrator to confirm that your contributions are up to date.

Tag: Pension fund

Is your employer paying retirement contributions to the pension fund?

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