Why preserving your retirement money matters
And what to do when you change jobs
If there is one financial decision that can quietly make or break your retirement, it is what you do with your pension when you leave a job. Cashing out often feels tempting, while preserving your money may feel dull. After all, you’re alive now, so why not enjoy your money, right?As tempting as that might be, there are several factors you need to consider before you “chop” your money.
Life expectancy in Namibia has risen to around 67 years. This means many people who retire at 60 will need an income for at least a decade, and possibly longer if they retire early or enjoy good health. The longer you live, the more damaging it becomes to take chunks out of your retirement savings.
According to the Bank of Namibia’s Inflation Forecast, consumer inflation is expected to hover around 3.6% in 2025 and 4% in 2026. If your savings leave the retirement system and sit in low-yield accounts, inflation will slowly erode their value. Spending your savings on consumption makes things even worse, although using the money for a retirement home is at least more future-focused.
Keeping your funds invested in the retirement system is one of the simplest ways to ensure your money continues to grow so you can smile when your retirement date arrives.
NAMFISA, through its consumer education programme, advises that most people need between 70% and 80% of their current pensionable salary to maintain their lifestyle after retirement. The state pension of N$1 600 helps, but it is not designed to replace a salary. It’s a safety net, not a full income.
That’s why choosing a preservation fund, such as the Kuleni Preservation Fund, can help grow your savings through well-managed investment options.
Tax rules also reward patience and penalise early cash-outs. Early withdrawals are taxed on the full amount, while saving until retirement allows members to take up to one-third tax-free, with the remainder used to buy an annuity for monthly income.
In simple terms: keep your money in a fund, pay less tax, and secure an income for later in life.
At the Kuleni Preservation Fund, transfers into the fund are tax-free. KPF allows for full or partial withdrawals within the first three years (subject to tax). After three years, withdrawals are no longer permitted.
Preserving your money is straightforward. When you resign, are dismissed or retrenched, you have three main options:
• Transfer your savings to your new employer’s fund.
• Leave the money in your previous fund (if allowed by the rules).
• Move it to an approved preservation fund, such as KPF.
These regulated options keep your savings invested for retirement, rather than withdrawing them and spending from your current account.
* Selby Sibeya is the CEO of Kuleni Preservation Fund.