WHATEVER happens when you change jobs, never squander your pension funds.

Research shows that only six out of 100 South Africans will be able to retire financially secure. And about 45% of formally employed South Africans have no form of retirement savings.

This led to the national Treasury proposing that people should be prohibited from cashing in their pension when they change jobs.

Michelle Human, legal marketing specialist at Liberty, said the first thing to understand was the difference between a pension fund, provident fund, preservation fund and retirement annuity.

A pension or provident fund is a benefit offered by your employer. You, as the member, and possibly your employer, will make a contribution to the fund every month as part of your salary package.

But, your membership of the fund is linked to your employment: if you leave your employer, you will normally leave the fund.

"One decision that you will have to make is what to do with your pension or provident fund. It might be tempting to withdraw the funds.

A retirement annuity on the other hand is a policy taken out individually.

It is not linked to your employer and is fundamentally your own private retirement savings plan.

You can contribute to your retirement annuity on a regular basis and add funds when you choose to, making it a flexible choice.

She said people ought to be saving 18% of monthly salary from age 25.