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What is a preservation fund?

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If you leave your employer and you have an existing pension or provident Fund, you have two options:

Cash out on the investment

This will mean selling out of the investment and taking the cash that has accumulated thus far. Doing so will mean that you are taxed, and this tax you pay on the lump sum would be more than if you retired from the fund. Read more about how tax is calculated when cashing out a pension fund before retirement age (55) here.

Transfer these funds into a preservation fund

A preservation fund is a way for your hard-earned retirement funds to stay preserved for when you need it in your later years. If you transfer your pension or provident fund to a preservation fund your money is disinvested and transferred as cash, which you then need to reinvest. It is then able to continue compounding over time.

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