Your worst money decision

BIG DON'T: UNDERSTAND RISKS ASSOCIATED WITH TAKING OUT YOUR RETIREMENT SAVINGS

- Martin de Kock

Withdrawing your pension from the Government Employees Pension Fund (GEPF) may seem like a tempting option, especially if you are facing immediate financial challenges. However, making this decision can have long-term implications that can significantly affect your financial future.

This article delves into the reasons why withdrawing your pension from the GEPF could be your worst financial decision, while also clarifying the different types of pensions and the calculation formula used by the GEPF.

Understanding pension types

Before diving into the specifics of the GEPF, it is important to understand the different types of pension plans.

Defined benefit pension

A defined benefit pension plan guarantees a specific payout upon retirement, based on factors like salary and years of service. The GEPF operates as a defined benefit scheme, meaning your retirement benefits are predetermined and not dependent on investment returns. This arrangement offers stability and predictability, allowing you to plan your retirement with greater confidence.

Defined Contribution Pension