Side by side
Same regulator (NBFIRA). Same tax logic. Completely different payout rules.
| Pension Fund | Provident Fund | Retirement Annuity | |
|---|---|---|---|
| Who sets it up | Employer | Employer | You |
| Who contributes | Employee + employer | Employee + employer | You only |
| Access before retirement | Only when you leave employment — subject to preservation rules | Only when you leave employment — subject to preservation rules | Restricted; the fund runs regardless of your job |
| Cash at retirement Income Tax (Amendment) Act, 2024 | Up to 50% as cash was max ⅓ before 15 Jan 2024 | Up to 100% as cash | Up to 50% as cash only 33.33% was tax-free before 15 Jan 2024 |
| The rest of the benefit | Balance buys an annuity (monthly pension) | — (already all cash) | Balance buys an annuity |
| Typical member | Salaried employee | Salaried employee; a common union preference | Self-employed, professionals, higher earners topping up |
| Tax relief | Only if the fund is approved — registered with NBFIRA and approved by BURS | ||
Each fund, four stages
What happens during your working life, if you leave your job, at retirement, and after.
Pension Fund
You both pay in
An employee percentage plus an employer percentage is deducted monthly. Growth compounds inside the fund — investment return is tax-free in an approved fund.
You become a deferred member
Preserve in the fund, transfer to a preservation fund or a new employer fund (tax-free), or cash out (BURS taxes it as income — usually the worst move). Under the Retirement Funds Act, 2022 a deferred member may draw up to 50% to settle a loan or mortgage, or up to 50% for medical costs, subject to strict conditions (unemployed six months or more, trustee approval).
Up to 50% cash + balance as pension
Under the Income Tax (Amendment) Act, 2024 you may take up to 50% of the benefit as a tax-free lump sum. The balance must buy an annuity that pays you monthly. Before 15 January 2024 only one-third could be commuted to cash.
Monthly pension, taxed
Annuity income is taxed in your hands at your marginal rate. Choose a guaranteed or a living annuity. A death benefit is paid to your nominated beneficiaries at the trustees' discretion — keep your nomination form up to date.
Provident Fund
You both pay in
The same accumulation as a pension fund — monthly contributions, tax-free growth inside the approved fund.
Same preservation logic
Preserve, transfer tax-free, or cash out and be taxed. The deferred-member loan and medical access under the Retirement Funds Act, 2022 applies here too.
Up to 100% cash
You may take the entire benefit as a cash lump sum. You can still choose to buy an annuity if you want a guaranteed income for life.
You manage the lump sum
There is no built-in monthly income, so drawdown discipline and longevity risk sit with you. Any annuity you buy is taxed at your marginal rate.
Retirement Annuity Fund
Your own debit order
No employer is involved. You choose the contribution and can change it. Growth is tax-free inside the approved fund.
Unaffected
It is not tied to any employer, so it keeps running. You can pause or resume contributions.
Up to 50% cash
Commonly from age 55. Take up to 50% as a tax-free lump sum under the Income Tax (Amendment) Act, 2024; the balance buys an annuity. Before 15 January 2024 only 33.33% of the cash taken was tax-free.
Annuity income, taxed
The monthly annuity is taxed at your marginal rate. The same guaranteed / living annuity choice and beneficiary rules apply.
The Income Tax (Amendment) Act, 2024 — what changed
From 15 January 2024 you may take up to 50% of your fund benefit as a tax-free cash lump sum; the balance buys an annuity.
The old one-third rule is gone. Before 15 January 2024 a pension-fund member could commute only one-third to cash, and only 33.33% of the cash taken was tax-free. The single rule now, across pension and retirement annuity funds, is up to 50%, tax-free. Provident funds still allow up to 100% cash.
Unchanged: growth inside an approved fund is tax-free; the monthly annuity or pension you receive afterwards is taxed at your marginal rate like any other income.
Worked numbers for your salary are in the Planner — Module 02 (Lump Sum) and Module 01 (Income & Strategy).
Find your fund
Why take one up — beyond the tax break
Compounding
Decades of tax-free growth. Money added in your 20s and 30s does most of the work.
Employer match
Opting out of a workplace fund throws away the employer's contribution — an instant loss.
Creditor protection
Approved retirement savings are generally shielded from creditors.
Forced discipline
Preservation friction keeps the money invested instead of spent.
Where this comes from
- Retirement Funds Act, 2022 — commenced 1 November 2022. Regulator: NBFIRA. Replaced the old Pension & Provident Funds Act framework. Defines pension, provident, retirement annuity, preservation and umbrella funds, and sets the deferred-member, preservation and benefit rules.
- Income Tax (Amendment) Act, 2024 — from 15 January 2024, the retirement lump sum is tax-free up to 50% of the benefit. It repeals the old position where a pension member could commute only one-third and only 33.33% of that was exempt.
- “Approved fund” = registered with NBFIRA and approved by BURS. No approval, no tax relief.
- Check your own fund: your member statement, your HR or fund administrator, or the NBFIRA register at nbfira.org.bw.
This guide covers Botswana only. It is not related to South Africa’s “Pension Funds Amendment Act 2024” — different country, different law.
Know your fund. Then plan it.
The Core Knowledge Retirement Planner turns these rules into Pula for your exact salary and fund — free.
Open the PlannerSpeak to an advisorEducational information based on Botswana law as at August 2026. Not financial or legal advice. Confirm the specifics with your fund administrator and a licensed adviser before acting.