/ 25 July 2011

Company fund vs retirement annuity

Vaneshen asks: My company is offering me the option to up my provident fund contribution from 6% to 8.5% unmatched by them.

Is it a good option or should I look at taking out some other investment option. I have my own personal RA which is about the same contribution as my provident fund contribution?

Maya replies: As a rule your company retirement is a cheaper way to save for your retirement because the costs are much lower than an individual retirement annuity. If you want to increase your retirement benefits then it would make sense to take up the company’s offer.

You say that your retirement annuity matches your current provident fund contribution (I assume that is 6% of salary) so if you increase your provident fund you will be saving 14.5% of your salary for your retirement which is the minimum you should be saving.

I would suggest you find out how much of your contribution for both your retirement annuity and provident fund is going to death benefits and what those benefits are worth. People often forget about those benefits when taking out additional life cover.

You should also be building up discretionary savings outside of retirement funding so that you have savings that are more flexible to meet other life goals.