A preservation fund exists to preserve your benefit until you retire.

Advantages of a preservation fund

1. Transferring a retirement fund into a preservation fund is tax-free.

2. Your money is invested and will grow. You have a few investment options as well.

3. You can withdraw some or all of the money before retirement. But you get only one chance.

4. If you die before you retire, your money will not form part of your estate but will be allocated to your dependents by the trustees of the fund in terms of Section 37C of the Pension Funds Act.

5. Your fund will remain untouched if you get into debt or become bankrupt.

6. You don't have to retire the fund at the same time you retire from employment.

7. You can take a lump sum of up to one third when you retire. You'll pay a lump sum tax rate and no capital gains tax.

8. The amount you save is only taxed on withdrawal.

Disadvantages of a preservation fund

1. You can't keep paying in as you do with a retirement fund.

2. Withdrawal isn't advisable, because it's subject to the same tax rate as taking money out of a pension fund.

3. You can only make one cash withdrawal before retirement as a result of a divorce or maintenance order deduction.

Weigh up your options and decide the best path for you by setting up a time to speak with an Old Mutual Financial Adviser.