Why preserving your retirement money matters
By Selby Sibeya /
IF there is one financial decision that quietly makes or breaks a retirement journey, it is what you do with your pension when you leave a job.
Cashing out feels tempting, while preserving the money feels boring. I mean, you are alive now, why not enjoy your money, right?
Well, as tempting as that thought is, you need to consider various factors, like living longer, before you chop your money.
Life expectancy in Namibia has risen to roughly 67 years. That means many workers who retire around 60 years, will need an income for a decade or more and even longer for those who retire earlier or enjoy good health.
The longer you live, the more damaging it is to keep taking from your retirement package.
The Bank of Namibia’s Inflation Forecast report expects consumer inflation to hover around 3.6% for 2025 and 4% for 2026. If your savings leave the retirement system and sit in low-yield accounts, inflation will erode their real value.
It is even worse when you spend your savings on consumption, but it is better if you spend it on your retirement home.
Keeping funds invested inside the retirement system is one of the simplest ways to keep your money growing, so you can smile at your Retirement date (i.e. 60 years).
Namfisa in its consumer education programme also advises that one needs 70% and 80% of one’s current pensionable salary to maintain the same lifestyle during retirement. The state grant of N$1,600.00 might help, but it is not designed to replace a salary. It is an important safety net, but you will not survive on it.
Thus, choosing a preservation Fund like Kuleni Preservation Fund, can help you save on your retirement and allow your capital to grow through a combination of investment options.
Tax rules reward patience and penalise cashing out early. Early withdrawals are taxed on the full amount, whereas saving until retirement lets pension fund members take up to one-third tax-free and use the rest to buy an annuity for monthly income.
In other words: keep it in the Fund, pay less tax, and secure an income for later in your older days. At Kuleni Preservation Fund, your transfer is tax-free when you transfer into the Fund.
Furthermore, KPF allows for a full withdrawals or partial withdrawals within 3 years subject to tax. After three years, withdrawals are no longer allowed.
Preserving is straightforward. You have three main options when you either resign, are dismissed or being retrenched. You can transfer your savings to your new employer’s fund, leave the money in your old fund (if the rules allow), or move it to an approved preservation fund such as KPF.
These are standard, regulated routes that keep your money invested towards retirement rather than withdrawing and paying it into your current account.
– Mr Selby Sibeya is the CEO of Kuleni Preservation Fund.
