One of the things that we should be thinking about as young adults is providing for our old days. No one wants to be old and poor. Unlike working for the government, there is no guarantee in the private sector that every employer will have a pension or provident fund of some sort and in many instances, even if they have, it’s not compulsory that you are required to contribute.
Before diving into, let us look at the difference between the three terms. Pension fund and provident funds are both retirements funds that are provided by the employer to their employees. They are linked to your employment and you will only continue to contribute to those funds for as long as you are employed by that particular employer. The only difference between the two is that, you will only be allowed to draw 1/3 as a lump sum in cash when you retire in a pension fund, and the rest, you will be getting it on a monthly basis. However, for a provident fund, you can take your entire savings in cash upon retirement.
On the other hand, you have a retirement annuity. This is something you can take out in your personal capacity and its not linked to your employer. The beauty of this is that with us millennials , we do not have the patience of working for one employer for long and hence are throwing away years that our retirement could be growing. Every time you resign from your old job, you get a pension payout? What will happen to you when you are old?
So if you do not foresee yourself working for one employer for long, or you are self employed, my advise to you is to take out the retirement annuity on your own. In addition, you do not have to cash out your pension when you move jobs, you can apply for it to be moved between funds.
Make the decision today to save for a better tomorrow. (Photo: Mum and grandma a few years ago)