Contributions plus growth
Your pension is built from two things: the money paid in, and the investment growth on that money. Over a working life, growth usually ends up larger than the contributions themselves.
This happens because of compounding. Each year's returns are reinvested and earn returns of their own, so the amount grows faster the longer it is left alone.
Why starting early matters
The table below compares three people who each save US$100 a month until age 65. The only difference is when they start.
| Starts saving at | Years saving | Total paid in | Value at 65 |
|---|---|---|---|
| Age 25 | 40 | US$48,000 | about US$240,000 |
| Age 35 | 30 | US$36,000 | about US$113,000 |
| Age 45 | 20 | US$24,000 | about US$49,000 |
Starting at 25 instead of 35 means paying in an extra US$12,000, but it roughly doubles the value at retirement.
What reduces growth
Fees and charges are taken from the fund, so lower costs leave more for you. Returns also go up and down from year to year, and inflation and currency changes affect what your savings can buy. In Zimbabwe, past currency changes have reduced the value of many members' savings, which is why ZAPF advocates for value preservation.
What you can do
- Join your employer's fund as soon as you are eligible.
- Check your benefit statement each year to confirm contributions are arriving.
- Ask whether your fund accepts additional voluntary contributions.
- Keep your savings invested when you change jobs; read our guide to changing jobs.