For many people, their retirement fund will eventually become one of the largest investments they own, yet because the money is deducted from your salary before you ever see it, it is easy to think of it as something that can simply be left to look after itself. The reality is that it deserves more attention than that. The decisions you make about how much you contribute, how the money is invested and whether you leave it untouched can have a meaningful effect on the income you have available later in life.
The first question to ask is whether the investment risk in your retirement fund makes sense for the amount of time you have until retirement. Someone in their twenties or thirties has decades in which to recover from periods of poor market performance, while someone approaching retirement has less time to do so. That does not mean younger investors should automatically take the highest possible risk, or that someone nearing retirement should move everything into conservative investments. Your own tolerance for seeing the value of your savings fall is important too. The sensible approach is to understand the fund’s investment strategy and make sure it reflects both your timeframe and your ability to tolerate market volatility.
It is also worth remembering that your retirement fund is only one part of your overall investment portfolio. If you are contributing to a pension fund through your employer, for example, you may already have a substantial portion of your long-term wealth invested in a particular mix of local and offshore shares, bonds and other assets. Other investments outside the fund should be considered alongside this, rather than in isolation. The aim is not necessarily for every investment to look the same, but for your overall portfolio to make sense.
One of the biggest mistakes you can make is to treat retirement savings as an ordinary savings account. Recent changes to the retirement system have made it possible to access a portion of retirement savings before retirement through the savings component of the two-pot system. Members can generally make one withdrawal from this component in a tax year, subject to the applicable minimum and the amount available. The fact that the money can now be accessed does not mean that it should be.
There will obviously be circumstances where accessing the money is necessary, but where a withdrawal is being considered simply because there is money available, it is worth thinking beyond the immediate cash payment. A withdrawal reduces the amount that remains invested and therefore the amount that can compound for the years ahead. There is also a tax cost, because the two-pot savings withdrawals are taxed at the individual’s marginal income-tax rate rather than the retirement lump-sum rates.
Your contributions themselves also deserve some attention, particularly from a tax perspective. Contributions to pension, provident and retirement annuity funds qualify for a deduction subject to the relevant limits. For the 2026/27 tax year, the deduction is limited to the lesser of R430 000 or 27.5% of the greater of remuneration or taxable income, with qualifying excess contributions carried forward.
This does not mean that everyone should simply maximise their retirement contributions without considering the rest of their financial position. An appropriate contribution needs to sit alongside emergency savings, short- and medium-term goals and other investments. But the tax deduction is an important part of the calculation and should not be overlooked when deciding where your next rand of long-term savings should go.
Ultimately, managing a retirement fund responsibly is less about trying to predict which investment will perform best next year and more about making decisions that remain sensible over decades. Contribute consistently, understand the risk you are taking, consider the fund as part of your wider portfolio, make use of the tax advantages available to you and, wherever possible, leave the retirement money alone. Time is one of the most valuable assets an investor has, and retirement savings work best when they are given plenty of it.