Planning for your future is essential to ensuring that you live comfortably when you retire, and you can do this by joining either a pension or provident fund.
Many companies offer their employees the option between the two funds, however, many people do not know the difference between the two or which one is the best option for them.
The most obvious difference between a pension and a provident fund is that you can only join a pension fund through your employer, whereas you can join and become a member of a provident fund without being employed.
Once you decide to retire, you may withdraw up to a third of your pension fund in a lump sum, while the remainder will be paid out to you monthly.
On March 1, 2021, the pension reforms came into effect, and a provident fund now works in much the same way. When you reach retirement age, you may take out a third of your benefits, which is taxable, while the remaining funds need to be invested into a retirement annuity, which will pay you out monthly.
Since the reform came into effect, there is not much difference between the two funds that have their benefits, which makes choosing one easier for employees.