MONEY
11/12/2017 16:38 SAST | Updated 11/12/2017 17:01 SAST

Steinhoff: Your Pension Isn't Always Safe

These are the questions you need to be asking.

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Many people are feeling stressed about the Steinhoff financial scandal and the possible impact on their pension fund contributions.

Financial advisor and managing director at Kingdom Wealth Services, Chris Chikumba, has dissected the risks and has a mixed message.

Chikumba was speaking to HuffPost SA following global retailer Steinhoff's accounting regularities scandal, which reportedly had a severe effect government employee pension funds, among other investments.

"Employers should have their employees' best interests at heart by finding a retirement fund with the best returns," he said.

"However, nothing is necessarily 100 per cent with investments. It's a game of taking risks," Chikumba cautioned.

"Your pension contributions might, according to financial logic, be in a safe and trustworthy fund, then something like Steinhoff happens, something beyond your control as a pension fund contributor. Something even asset managers couldn't have picked up. And then your investment takes a huge dip overnight.

"So, you are not only trusting that your company has suitably invested your pension contribution, but you also hope that nothing like Steinhoff happens to the company entrusted with your funds."

Chikumba advised employees to take greater interest in their company retirement funds.

"Know the name of your company retirement fund. Know what benefits you or your dependants are supposed to get from it. By law, your fund should give you information about how it works and its benefits."

These are some key questions he advised asking:

1. What kind of fund do I belong to? Is it a provident or pension fund and what's the difference?

2. How much money am I contributing to the fund per month? Is this enough?

3. How much money is due to me when I retire?

4. Will I be taxed on that money? If so, how much?

5. How does my pension cover my dependants should I die?

"Retirement funds represent some people's biggest savings and you should be interested in the company that handles that money. But as I said before, with every investment there's risk."