Discover how changing jobs can affect your pension and learn the best strategies to preserve your retirement savings for a secure future.
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Before the two-pot system took effect in September 2024, the South African Revenue Service (Sars) estimated over 700,000 individuals cashed out their retirement savings each year when they left their employment. Most did it because they wanted or needed money, didn’t understand the financial costs involved, didn’t know there was an alternative, or assumed they had no choice.
That single decision set many of them back financially for decades.
When you leave a job, you can transfer your full balance into a preservation fund, which is designed to keep your pension or provident savings invested and growing between jobs until you retire.
Should you opt to cash out your retirement savings, you will trigger an immediate tax hit under Sars’s lump-sum withdrawal tables. The first R27,500 is tax-free. Anything above that is taxed at 18% or more, depending on your cumulative withdrawal history, and if you have any outstanding tax debt, Sars takes what is due before you see a cent.
When you withdraw early, you don’t just lose the money you take out, you may lose some growth it would have generated over the next 20 or 30 years. Over that kind of timeframe, a single withdrawal can be the difference between having a comfortable income in retirement and relying on others to get by. Compounding only works on money that stays invested; once you interrupt that process, it may be difficult to recover later.
Only about 6% of South Africans are on track to retire comfortably, shows 10X’s Retirement Reality Report. There are many reasons for this, from low overall saving levels to high fees, but one of the few factors you can directly control is what you do with your retirement savings when you change jobs – and it comes down to whether you preserve them or cash them out.
A preservation fund exists for this precise situation. When you leave a job, you can transfer your full pension or provident fund balance into a preservation fund, in a single, once-off transfer, requiring no monthly contributions. Your money stays invested, stays in the market, and keeps compounding.
Think of it as a place to park your savings between jobs. Your savings aren’t idle; they grow, so you maintain investment momentum instead of resetting the clock every time you change employers.
While preservation funds are designed to protect your long-term savings, they do come with limits. Withdrawals are highly restricted, typically only once before age 55, which means your money is largely locked in until retirement.
What two-pot changes, and what it doesn’t
The two-pot retirement system, which came into effect on September 1, 2024, was designed to reduce the pressure to cash out, giving people limited, structured access to a portion of their savings so they are less tempted to cash out their entire savings, or even resign just to get money in an emergency.
Under the new rules, all contributions made after that date are split. One-third goes into a savings pot, accessible once a year (minimum R2,000, taxed at your marginal rate). Two-thirds go into a retirement pot, fully locked until age 55.
A preservation fund also has three distinct components: Your vested pot, which is everything accumulated before 1 September 2024, still allows one withdrawal before 55, taxed under the Sars lump sum tables. Your savings pot allows one withdrawal a year for emergencies, to a minimum of R2,000, taxed at your marginal rate. And your retirement pot, which is locked until 55, giving you no early access.
For most mid-career employees, the vested pot comprises the largest chunk of their retirement savings, which is not protected by the two-pot system. The only thing that keeps you from accessing it is your decision not to.
Under the two-pot, because the savings pot now gives you emergency access without resigning, cashing out your vested balance when you change jobs may be less necessary for many individuals.
What to look for in a preservation fund
Not all preservation funds are the same. How your savings grow over time is influenced by fees, transparency, and investment strategy.
It’s worth understanding how – and what – you’re being charged. Upfront fees, switching penalties, and layered fee structures may all erode your eventual outcome, even if they aren’t obvious.
By contrast, index‑tracking strategies that aim to follow the market often deliver more consistent after‑fee results than many actively managed approaches.
Research shows that over long periods, most professional fund managers fail to beat the market’s average return, primarily because their higher fees eat into your gains.
The latest S&P Indices Versus Active South Africa Year-End 2025 Scorecard shows 94% of actively managed South African equity funds underperformed their benchmarks over the past 10 years. Because index-tracking strategies focus on matching the market at a much lower cost, they allow more of your money to stay invested and compound.
10X Investments’ research indicates that a seemingly small fee difference of just 1% can result in 30% less money for your retirement after 30 years. Diversifying across different assets like bonds and global stocks further stabilises your savings, ensuring that your nest egg isn’t reliant on a single “hero” stock or manager to succeed.
A portfolio that spreads your money across local and global equities, bonds, property, and cash can also help reduce the impact of market swings on your savings.
Changing jobs is a career move; it doesn’t have to become a retirement setback. Cashing out puts you on the back foot, because you take an immediate tax hit and lose years of growth that are hard to rebuild.
A job change is a good point to check how and where your retirement savings are invested, and whether they are still doing what you need them to do. A transparent, low‑cost preservation fund is one way to keep your money invested and compounding in the background.
Your pension is not something you simply leave behind when you resign. It should move with you and be parked where it can keep working for you, with costs and returns that support your long‑term goals.
* Rossouw is the senior investment consultant at 10X Investments.
PERSONAL FINANCE