Historically, the main difference was the lump sum rule at retirement: pension funds restricted lump sums to one-third, while provident funds allowed the full balance as a lump sum. Since 1 March 2021, new provident fund contributions are subject to the same annuity requirement as pension funds. Pre-2021 balances remain eligible for full lump sum treatment.

You can access your retirement fund benefit on resignation, retrenchment, or dismissal. Early withdrawal is heavily taxed — the resignation tax table applies, which is less favourable than the retirement tax table. Preservation funds allow you to defer tax by rolling over the benefit.

Post-2021, the products are broadly equivalent in tax treatment. Your employer typically determines which fund type is offered. The decision is less about fund type and more about contribution rate, investment options, and fund fees. A retirement annuity (RA) supplements both.

You can: (1) transfer tax-free to your new employer's fund, (2) transfer to a preservation fund, or (3) cash out (taxed). Option 3 is the least financially sensible long-term. A preservation fund maintains the tax-free growth and defers the retirement tax table treatment until actual retirement.

A retirement annuity (RA) is an individual, portable retirement savings product independent of your employer. It has the same tax deductibility (27.5% / R350,000 p.a.) and the same two-thirds annuity requirement at retirement. RAs are not accessible until age 55 and supplement employer-based fund membership.