When it comes to attracting and retaining talent in your organisations, provident and pension funds can go a long way to increase job satisfaction and loyalty. If an employee knows they’re financially secure in retirement, they’re more likely to be productive, while improving your reputation and corporate image at the same time.
Pension fund vs. provident fund – what’s the difference?
A pension fund is a retirement fund that receives frequent contributions (usually monthly) from you and your employees. At retirement, your employees can access up to one-third of the benefit in cash, and the remaining two-thirds must be used to purchase an income annuity. As of South Africa’s new retirement reforms, a provident fund is now similar to a pension fund, except that fund members are required to take a third of the benefit as a lump sum, and must use the remaining two-thirds to buy a pension that provides a monthly income.
Why should you think about a pension or provident fund for your employees?
It gives them peace of mind:
Knowing that there is a structured plan in place for retirement that helps them avoid financial hardship gives your employees peace of mind, allowing them to focus on their work and personal lives.
It may hold tax advantages:
Contributions made by your business to these funds are often tax-deductible, which can reduce the overall taxable income of your business.
It gives you a more stable workforce:
A well-structured retirement plan helps in planning for workforce transitions, ensuring smoother succession planning and knowledge transfer.
They can mean more investment growth:
Because pension and provident funds are professionally managed and invested, they can potentially yield higher returns compared to individual savings, which helps boost their retirement nest egg.
By providing pension and provident funds to your employees, you can offer them valuable financial security, which benefits both you and them. Want to know more?
