How to build a growth-oriented investment strategy inside your preservation fund (while adhering to Regulation 28)

A preservation fund can be a powerful way to build capital and continue to grow your savings when changing jobs. This is a great opportunity, as a preservation fund allows you to safeguard your savings instead of being forced to withdraw them, which in turn means they may continue to potentially grow and compound over time.

But many investors default into overly conservative fund choices, which unintentionally limit the potential for meaningful compound growth. By focusing on low fees and carefully selected funds, including exposure to equities and offshore investments, you can position your preservation fund for stronger long-term returns.

In this article, we’ll explore how to construct a growth-oriented preservation fund that remains fully compliant with Regulation 28, giving you the information needed to maximise the potential of this retirement savings vehicle.

Understanding preservation funds

Preservation funds are long-term retirement savings vehicles designed to protect and grow your accumulated retirement capital when you change jobs. The savings which have been accumulating in employer-sponsored pension or provident funds can then be transferred across to a preservation fund, without triggering a tax event. You will need to ensure that your pension fund is transferred to a pension preservation fund and your provident fund is transferred to a provident preservation fund.

Growth within the preservation fund is also tax-free. This has the benefit of potentially more returns being available to compound and grow over the long run. This tax-efficient structure allows more of your returns to stay invested, improving the potential power of compound growth and strengthening your long-term retirement outcomes.

Why long-term growth matters so much in a preservation fund

A preservation fund is a long-term investment vehicle. For many, these savings may stay invested for 15, 20 or even 30 years or more before retirement. That long time horizon is one of your greatest advantages, as time is what allows compounding to work its magic.

Unlike other retirement vehicles, preservation funds cannot receive additional contributions after the initial transfer. This means that the future value of your investment depends entirely on the returns it generates over time. You can’t top up to boost the balance, and growth will have to come from disciplined, well-structured investing.

To achieve some meaningful real growth, exposure to equities is generally necessary, as these have historically delivered the strongest returns over extended periods. They are, however, also the most volatile of the asset classes in the short term. While this volatility may be uncomfortable, a long investment horizon gives you the time needed to ride out market fluctuations.

Despite this, preservation funds sometimes end up invested too conservatively. This can happen when investors become cautious after changing jobs or because short-term market volatility creates fear. In some cases, the default option selected at the transfer might not align with long-term growth objectives. Over time, this conservatism can meaningfully reduce the power of compounding.

Asset allocation for a growth-oriented preservation fund

At 10X, you’ll have the freedom to customise your underlying portfolio by choosing from a selection of carefully designed funds, each with a different mix of assets and geared towards different investment profiles. These assets include a mix of equities, bonds, cash, real estate and offshore investments. Asset allocation plays the biggest role in the performance of your preservation fund, accounting for over 90% of returns, as seminal research from Brinson,Singer and Beebower shows.

Equities have historically produced returns above inflation, by around 7% annually, over the long term (based on JSE All Share Index performance versus CPI from 1960-2020). However, it’s important to note that past performance does not guarantee future results.

Bonds will add stability to a portfolio but will likely produce lower returns. This is not to say they will never perform well, but that it is generally seen as a more conservative option. Real estate, also known as property, can provide a good hedge against inflation, while cash is the most stable of the asset classes, but likely to generate the lowest returns of all.

Diversifying your portfolio across the various asset classes allows you to balance both growth and stability. You may also consider further diversifying offshore, which opens you up to opportunities in the international market and may provide a hedge against local market instability and any subsequent depreciation of the Rand.

Preservation funds need to adhere to Regulation 28 of the Pension Funds Act. Regulation 28 puts a cap on the percentage that you may invest in equities and offshore markets in order to protect investors and to help avoid any poorly diversified portfolios. Currently, regulations state that you may have a limit of 75% in equities and a limit of 45% offshore.

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Building a growth strategy using 10X funds

10X offers a range of well-diversified, Regulation 28-compliant funds, which are conducive to a growth-oriented strategy, depending on your investor profile and long-term financial goals. Let’s take a closer look at some of the different fund options within the preservation fund “wrapper.”

10X Your Future Fund

This 10X flagship fund provides a mix of local and international assets. It includes a higher percentage of growth assets, such as equities and real estate, but it is not a 100% equity fund. This fund is best suited to investors seeking long-term capital appreciation to build wealth. You would ideally look at an investment period of at least 5 years. Fund exposure is 64.8% local and 35.2% offshore. Over the past five years, the fund has delivered an annualised return of 13.4%.

10X Income Fund

This is the second of the 10X flagship funds. It’s a cost-effective fund that offers the investor access to a wide range of both local and international interest-bearing assets. This fund focuses on providing the investor with both capital stability and a high level of income. While returns may fluctuate in the short term, the ideal time horizons for this fund would be 3 years or more. Fund exposure is 84.4% local and 15.6% offshore. Over the past three years, the fund has delivered an annualised return of 9.9%.

10X Moderate Fund

This is a medium to long-term fund with an ideal investment period of at least 3 years. This fund offers exposure to both local and offshore assets, with a higher percentage of growth assets versus bonds and cash. This allocation aims to balance growth potential with reduced volatility relative to higher equity portfolios. Fund exposure is 66.6% local and 33.4% offshore. Over the past five years, the fund has delivered an annualised return of 12.5%.

Please explore our products for up-to-date fee information.

Why 10X’s low fees boost growth

Fees are often overlooked when it comes to investments, but they play a major role. Low fees have the potential to boost growth significantly in the long term. Let’s have a look at an example to help illustrate the effects of fees on your preservation fund: We will assume the following factors:

• Investment period of 30 years
• Initial investment of R500K
• Return of 12% per annum
• An inflation rate of 6%

Example 1 (1% Fees): Real investment value is R1.99M

Example 2 (3% Fees): Real investment value is R1.16M

It is clear to see how high fees can potentially impact your real investment value, this is especially evident when these high fees are compounded over time. Please note that this example is for illustrative purposes only, and real results may vary. Find out more information on how fees impact your retirement outcomes here.

As an investor, it is important that you are aware of the fees that you are being charged on your preservation fund. Here are some of the fees that you may see deducted:

Management fees: These are the fees charged for the running and management of the fund.

Advisor fees: These are the fees charged by an advisor for their advice and services. You may expect to see both an initial and an ongoing fee charged.

Administration fees: There will be an administration fee charged for tasks such as reporting, compliance and tax. T

he Effective Annual Cost (EAC) is a metric which was introduced by ASISA in 2015. This allows you to see the total fees and costs of owning an investment over a one-year time period. This information can then be used to compare and evaluate fees and costs levied by different service providers. All factors being equal, a higher EAC would mean that less of your investment returns can be reinvested and potentially grow and compound over time, while a lower EAC means that more of your returns may be reinvested and potentially grow over the long term.

The EAC of an investment is just one factor to consider when comparing service providers. 10X offers a free EAC calculator, which is a part of our free online suite of tools. This is a useful calculator that can be used to compare and evaluate different service providers, so that you can make an informed decision going forward.

At 10X, we focus on low fees, which may allow for more returns to be reinvested and potentially grow and compound over time. The fees we charge at 10X are usually less than 1% for retirement products. This does depend on the amount invested and the product chosen. Fee information is correct as of February 26th 2026.

Designing your personal preservation fund growth strategy

Step 1 — Identify your time horizon

The first step is to identify your time horizon. How long do you anticipate you will have before you decide to retire from your preservation fund? The retirement age is currently 55 in South Africa, but many work for much longer. The shorter the timeline, the more conservative you may look at going with your fund selection and vice versa. Upon retirement, you will transfer your fund to an annuity. This annuity will then provide you with an income for retirement.

Step 2 — Determine your risk tolerance levels

Your risk tolerance level refers to how comfortable you are with market volatility in the short-term. Generally speaking, the younger you are, the more comfortable you will be with market volatility as you have longer time lines at play. An older investor will most likely be looking at shorter timelines, which may mean they are not as comfortable with volatility in the market. A well-designed preservation strategy strikes a balance between risk capacity (your financial ability to take risk) and risk tolerance (your emotional comfort with risk), ensuring that you remain invested through market cycles rather than reacting emotionally to short-term noise.

Step 3 — Choose an appropriate 10X fund option

Once your time horizon and risk profile are clear, assess the various 10X fund options and choose the appropriate fund that best aligns with your risk tolerance levels, investment timelines and long-term financial goals. Consider factors like asset allocation, offshore exposure, equity weighting and total investment costs. Remember to choose a fund that aligns with your long-term goals rather than short-term market conditions.

Step 4 — Review annually, not emotionally

While preservation funds are long-term investments, they shouldn’t be ignored. An annual review helps make sure that your asset allocation is still aligned with your changing life stage, retirement timeline and risk profile. Keep in mind that reviews should be structured and strategic, not reactive.

Common mistakes when investing in a preservation fund (And how to avoid them)

Investing too conservatively

It’s important to align your asset allocation with your investor profile, in particular your risk tolerance levels, timelines and your financial goals. In addition to this, you want to make sure that you are not too conservative with your asset allocation and include some equities for growth potential. Generally, you want to avoid investing too heavily in cash, as they tend to provide the lowest returns.

Ignoring offshore allocation

Diversifying offshore can provide benefits such as access to the considerably bigger international market and the various opportunities that may be on offer here. As mentioned, it may also provide a good hedge against any instability in the local South African market including depreciation of the Rand.

Paying high fees without realising it

Not paying attention to the fees that you are paying. High fees may impact the growth of your preservation fund as more of your returns need to go towards covering the fees, which may mean that there are fewer returns available to be compounded and grown over time.

Final thoughts: A preservation fund is a growth opportunity

A preservation fund can be a fantastic way to both preserve and grow your savings over time, eventually providing for your retirement years. Focusing on low fees and well-diversified funds that include equities and long-term compounding may result in excellent retirement outcomes.

10X takes the hard work out of the equation by providing you with a varied choice of funds that have been carefully selected to ensure diversification and Regulation 28 compliance. Stay focused on the long-term, low fees and appropriate fund choice and let your preservation fund work for you. 10X’s expert investment consultants are available to assist with any queries that you may have, or perhaps you would like to find out more about our preservation fund. Don’t hesitate to get in touch!