Is it really worth having a pension/provident fund?

[Scooby_Doo]

The economy is screwed mate. Have you not seen?

I know, I know, I was just looking at the US equity growth over the same period. That comparison would hurt if you have an RA.

 

[Moto Guzzi]

Hi Everyone,

So I just started working this year, and the company I work at makes it compulsory for employees to have medical aid and a pension fund. This is all cool, I have no issues with that. Over the weekend, I thought now is the time I should have a look at the pension, and noticed the total reflected in there does not add up to the monthly contributions taken from my remuneration package. Upon skimming through everything, it looks like my pension fund has been losing money (I saw one of the documents mention approx. 1K was lost in disinvestment's). I am on Alexander Forbes Pension Fund.

I know my question sounds a bit silly, but, is it really worth having pension/provident fund, when your provider gets to play with your monthly contributions and you end up losing money [at least that is how I see it]? I am still new to all this, so I was a bit shocked. What alternates would work?

Yes, but your hair will raise multiple times. Look at the service providers supporting the fund, see if your hair raises even more. Is the cash portion stored at a known safe entity for example-?

If you're an ordinary worker you also has to swollow the bitter pill that your pension of 40 years on retirement may not even match an excecutive yearly bonus of one year due to all the "losses" allong the way.

 

[MrGray]

Up until recently I would always have said that, yes, it is essential to have some kind of retirement vehicle. However, with talk of prescribed assets, where they want to legislate that a portion of your savings have be in prescribed assets that the government will determine, i.e. Eskom, etc, I'm very worried about the loss of value. We're also potentially approaching a "fiscal cliff", where the state will run out of funds and this will inevitably cause a massive decline in the Rand's value. If I was starting out now, I would look seriously at any savings vehicle that is offshore based, even if it's just a foreign currency denominated account with one of the local banks.

 

[backstreetboy]

I know, I know, I was just looking at the US equity growth over the same period. That comparison would hurt if you have an RA.

You invest for 20/30 years plus not 6.

https://www.moneyweb.co.za/investing/the-jse-is-not-an-outlier/

 

[Scooby_Doo]

You invest for 20/30 years plus not 6.

https://www.moneyweb.co.za/investing/the-jse-is-not-an-outlier/

Sure, but factoring in the risk of having 70% of your portfolio in SA should be a concern. I do not think the difference in return between SA and the USA in that grid when adjusted for risk is worth keeping most of your portfolio in a SA RA.

 

[supersunbird]

6.4%?

Eish...

Well, the ALSI gave:

15.29% in total for the 5 years from 8 Aug 2014 to 2 Aug 2019.

30.10% in total for the 28 Dec 2012 (closed I could get to 1 Jan) to 2 Aug 2019

If my maths it correct, 6% (it's the annualized return after all) would be 36% growth in the 10X over it's period, so better than the ALSI.

 

[Tman*]

The new unit trust based RA's haven't been around that long yet so understandable. Can't compare them to the old policy based RA's... Night and day difference.

Basically what you are saying is: "the new policies are much better, but they havent been here long enough to be able to prove this conclusively, but trust me, they are".

Sigh. How many times do we have to go through such debates...

Shortly and sweetly - for the average working man, you are wrong, sir.

Because the average working man will never ever be able to retire on a pension/RA?

Point to my original post is that there are many other options available as opposed to traditional retirement savings vehicles that everyone should consider. They have proven to be expensive and provide generally kak (in this very thread - 6.40% ) return.

 

[Beyond.Celsus]

Anything is better than nothing

 

[krycor]

Basically what you are saying is: "the new policies are much better, but they havent been here long enough to be able to prove this conclusively, but trust me, they are".



Because the average working man will never ever be able to retire on a pension/RA?

Point to my original post is that there are many other options available as opposed to traditional retirement savings vehicles that everyone should consider. They have proven to be expensive and provide generally kak (in this very thread - 6.40% ) return.

It's the buying the house option for people who can't trust themselves to save the equiv of purchase price i.e. loan amount.

 

[SauRoNZA]

It's a terrible year to be looking at these things and more so taking a look over a single one year period is never going to give you really positive results.

Take a five year view and then consider. Remember these things are designed to work over 30+ years, not be instant money makers.

 

[RandomGeek]

Hi Everyone,

So I just started working this year, and the company I work at makes it compulsory for employees to have medical aid and a pension fund. This is all cool, I have no issues with that. Over the weekend, I thought now is the time I should have a look at the pension, and noticed the total reflected in there does not add up to the monthly contributions taken from my remuneration package. Upon skimming through everything, it looks like my pension fund has been losing money (I saw one of the documents mention approx. 1K was lost in disinvestment's). I am on Alexander Forbes Pension Fund.

I know my question sounds a bit silly, but, is it really worth having pension/provident fund, when your provider gets to play with your monthly contributions and you end up losing money [at least that is how I see it]? I am still new to all this, so I was a bit shocked. What alternates would work?

Does your pension fund include death and disability insurance? If so a part of your monthly deductions goes toward this, which if it is the case may explain some of the reduction in value

 

[diapason]

I am on Alexander Forbes Pension Fund.

Are you sure it's a pension fund and not a provident fund? Many people use the word "pension" very loosely to describe any type of retirement funding.

A pension fund is not very common nowadays outside of Govt/SOEs, etc.

 

[supersunbird]

Basically what you are saying is: "the new policies are much better, but they havent been here long enough to be able to prove this conclusively, but trust me, they are".



Because the average working man will never ever be able to retire on a pension/RA?

Point to my original post is that there are many other options available as opposed to traditional retirement savings vehicles that everyone should consider. They have proven to be expensive and provide generally kak (in this very thread - 6.40% ) return.

Well, if you are gonna use my posts:

LOL, well then you exclude SA equity from your own investments right? If you have no confidence in SA economy and equity going forward, just say so. If you are basing your opinions on old life insurance company RAs, you must base your opinions on other things that are old, on cellphones and Windows 95 and 98 and computers and TVs from '90s and older tech, ok?

Performance of 10X in the other years (before fees):
2013 - 20,8%

2014 - 12,6%

2015 - 8,3%

2016 - 1,8%

2017 - 13,3%

2018 - -3,3%

If I had the full current fund value back in 2013, the result would have been more than 6.4%, the 6.4% you refer to is my individual performance over 5 and whatever years.

 

[MrGray]

It's a terrible year to be looking at these things and more so taking a look over a single one year period is never going to give you really positive results.

Take a five year view and then consider. Remember these things are designed to work over 30+ years, not be instant money makers.

This is true, but speaking as someone who's been invested through numerous long term up and down cycles for 30+ years I just have the sense that due to the imploding political and economic situation locally, "this time it's different" might actually be the case. I've always confidently socked money away through past economic downturns knowing that everything is cyclical and eventually turns around, except I haven't been feeling that any more in SA for a while now. Things just feel so hopeless when the ingrained ideology of the hegemony seems to be that all wealth accumulation is bad, private ownership is evil and enforced equality of outcomes is the only way forward. Between the SOEs imploding, skyrocketing public debt, impending NHI, EWC, large multinationals disinvesting, etc etc, I think we're in for something far worse than a ~5 year cyclical downturn.

 

[supersunbird]

Are you sure it's a pension fund and not a provident fund? Many people use the word "pension" very loosely to describe any type of retirement funding.

A pension fund is not very common nowadays outside of Govt/SOEs, etc.

It's common outside of those places mentioned too.

 

[beefymoocow]

Hi Everyone,

So I just started working this year, and the company I work at makes it compulsory for employees to have medical aid and a pension fund. This is all cool, I have no issues with that. Over the weekend, I thought now is the time I should have a look at the pension, and noticed the total reflected in there does not add up to the monthly contributions taken from my remuneration package. Upon skimming through everything, it looks like my pension fund has been losing money (I saw one of the documents mention approx. 1K was lost in disinvestment's). I am on Alexander Forbes Pension Fund.

I know my question sounds a bit silly, but, is it really worth having pension/provident fund, when your provider gets to play with your monthly contributions and you end up losing money [at least that is how I see it]? I am still new to all this, so I was a bit shocked. What alternates would work?

The 1k divestment is the premium for your income protection and other benefits. I have the same thing. My company pays an extra in my AF funds to compensate for the deduction. Ask your HR for better clarity. I did and someone from AF came and explained.

 

[maumau]

Yes, but your hair will raise multiple times. Look at the service providers supporting the fund, see if your hair raises even more. Is the cash portion stored at a known safe entity for example-?

If you're an ordinary worker you also has to swollow the bitter pill that your pension of 40 years on retirement may not even match an excecutive yearly bonus of one year due to all the "losses" allong the way.

Losses and inflation.

 

[Corelli]

Firstly its tax deductable. 2nd if you get retrenched you can claim a once off R500k tax free, and generally its over long term and not short term. Maybe see if you can move to a different fund.

Even my pension fund that i left there used to score 15% interest and currently only 2%.

Sadly you cant opt out but look at your fund options. Maybe look for a different fund performing better.

 

[Corelli]

Your pension fund and property (ideally in CT) are your biggest assets. Youre pension fund contributions are tax deductable.

I would rather throw more money at my pension fund that drive a fancier car. My SA pension fund currently scores about R10k per month in interest alone. Although low its your overall balance thats supposed to double every 5 years.

 

[panayi]

2 things to research....

1. Markets/equities rebound very well after bad years...eg 1997/8, 2008, hopefully 2018 (although other factors at play)...so you need to be in market to access the gains.
2. Time value of money. You are young so have time on your side. Go research Julia on 702....modest living, saving and time really compound your wealth.

Also research tour pension fund investments / performance and be an active member to make change happen...