What happens to your retirement savings when you leave a job is one of the biggest financial decisions many South Africans ever face — yet it is still one of the most badly handled. For too many workers, resignation day becomes the moment where hard-earned pension money is either left stranded in an old employer fund or taken in cash, with long-term consequences that only become obvious years later.
That warning comes through strongly in a conversation between 10X Investments senior investment consultant Michael Rossouw and presenter Mpho Chitapi, where the pair unpack the retirement choices people make when they move between employers. As we reported earlier, the issue is not just about where the money goes next. It is about whether that money keeps working for you, or whether it disappears into spending and lost growth.
In South Africa, job changes are common, especially in a labour market where retrenchments, career moves and contract shifts are part of everyday economic life. Yet many employees still do not fully understand what happens to their retirement benefits when they resign. The assumption is often that the fund “belongs” to them and can simply be taken along. That is not how the system works.
Rossouw makes the point clearly: under the Pension Funds Act, employees do not own their employer pension or provident funds. Those funds are created by a company, and workers are members of that employer-sponsored scheme. Once employment ends, the relationship with that fund changes. That distinction matters, because it shapes what options are actually available.
The practical choices are usually threefold: leave the money where it is, transfer it to another retirement vehicle, or take it out in cash. Of those, the cash option is the most dangerous. It may feel like the most flexible choice in the moment, especially if a person is under pressure, but it can severely damage long-term retirement outcomes.
Rossouw’s message is blunt: cashing out interrupts the power of compounding. Once capital is withdrawn, it stops growing, and the future value that money could have earned is lost. Even if a worker later lands a better-paying job, rebuilding that lost base is far harder than people expect. The result is often a retirement shortfall that only becomes visible much later in life.
A preservation fund is one of the better alternatives. Unlike an employer fund, a preservation fund allows a person to transfer retirement savings when leaving a job and keep the money invested for the future. It gives the saver more control over how the money is managed, what it is invested in and how it fits into a broader retirement strategy.
That control is important in a country where too many people delay retirement planning until they are already behind. A preservation fund can be aligned to a person’s age, risk tolerance and long-term goals. It can also sit alongside a retirement annuity or a new employer fund, helping the saver build one coherent plan instead of scattering savings across different pots with no clear strategy.
Leaving money behind in an old employer fund may seem harmless, but it often means surrendering control. The money can become disconnected from a person’s broader financial life, and over time that can lead to forgotten accounts, poor oversight and missed opportunities to optimise investment choices. For many savers, that is nearly as damaging as withdrawing the funds entirely.
Why the retirement decision South Africans get wrong often comes down to fees
One of Rossouw’s strongest warnings is about fees. He says many retirement products are quietly undermined by the cost of managing them, and those costs compound in the same way investment returns do — except in the wrong direction. In other words, even small fee differences can make a very big difference over decades.
He urged savers to look closely at the effective annual cost (EAC) of any retirement product before signing up. The headline fee may look manageable, but once all the layers are added up — administration, advice, investment management and other charges — the real cost can be significantly higher. That is especially important for workers being sold long-term products with complex terms.
According to Rossouw, a difference of just 1.5 percentage points in annual fees may not sound dramatic at first glance. But over a working lifetime, that gap can eat into a substantial portion of retirement capital. In a market where many South Africans already struggle to save enough, paying more than necessary can mean retiring with far less than planned.
The reality is that higher fees do not automatically mean better performance. Some products charge premium rates without delivering premium outcomes. Rossouw’s advice is for savers to ask hard questions, compare products carefully and avoid assuming that expensive always means better. That is especially true when the money is meant to support someone for decades after they stop working.
The rise of online retirement calculators and AI-powered planning tools has made it easier for people to run their own numbers, and Rossouw is not dismissive of that. He says these tools can be helpful, but only if the inputs are realistic and the assumptions are checked properly. A slick interface does not guarantee a good financial outcome.
South Africans should be careful not to treat a calculator output as a promise. Retirement projections are only as accurate as the data entered into them. If people underestimate inflation, overestimate returns or ignore fees, the result can paint a far more comfortable picture than reality will deliver. That is why the numbers need to be interrogated, not simply accepted.
The broader lesson is that changing jobs should trigger a retirement review, not a panic withdrawal. It requires attention, some basic understanding of the available vehicles and a willingness to think beyond the immediate cash in hand. The choice made at resignation can shape the financial life of that person’s future self for decades.
The point, as Rossouw puts it, is simple: it is your money — but what you do with it now will determine how much of it is still there when you need it most. In a country where retirement insecurity is already a growing concern, South Africans cannot afford to treat this decision lightly.