The average matching contribution is 4.3% of the person's pay. The information is captured on Excel spreadsheets. In the case of electronic transactions, our contribution management process consists of the following steps: Raising the amounts payable by the employer and member: This information comes from the monthly salary information obtained from Persal and Persol. Ordinarily then, after the monthly contribution has been paid over to the fund, the employer steps out of the picture and has nothing more to do with the member's pension benefit. So after 40 years, you'd get half your wage as a pension, plus 120/80ths as a lump sum, worth 1½ times your yearly salary. The information is available by the third week of every month for the month concerned. If you have a defined contribution pension - the most common type of pension nowadays - the value of your pension on retirement depends on how much you’ve paid into your pension, the performance of your investments, and the fees taken by your pension provider.. Workplace pension contribution calculator. This is submitted to GEPF management and the Board’s Benefits and Administration Committee. By Kobus Hanekom, 24 March 2014. Members have to apply for this andif theGEPF approves their application for the Purchase of Service, they must pay the approved amount with interest. Therefore, paying an extra, say, 5% of your wage into a pension could cost you just 4%, 3% or even 2.5% of your pay, thanks to tax relief. (3) P.L. In these schemes, just 20 years of service would earn you a guaranteed pension worth two-thirds of your final salary. Electronic interaction is possible when an employer uses the National Treasury’s transversal systems, Persal or Persol, to administer its salaries. (2) P.L. And the employer now decides to join a pension fund and will contribute 5% and the other 5% will be a … This interaction can take place electronically or manually, depending on the salary administration system that each employer uses. Voluntary contribution. The advantage of doing this is you get tax relief at your highest tax rate. How much your employer pays in (the higher its yearly contributions, the better); How much you pay in (your yearly contributions); Your investment returns over time (the higher, the better); and. However, the most generous schemes -- usually open only to directors, top executives and senior managers -- can offer accrual rates as high as 1/30th. Typically, this will give you, say, three to four times your salary if you die in service. All members of the Fund … Allocating receipts: GEPF captures and allocates receipts for payments to the debtor accounts daily; however to finalise this process for a specific month, the receipts must be captured and allocated by the 10th of the next month in preparation for reconciliation. If the payment was late, it is followed up in terms of GEPF’s Debt Collection Policy. However, employees enrolled in pension plans may elect or be required to contribute to the plan. It consists of the following steps: Raising the amounts payable by the employer and member: The GEPF checks that participating employers have submitted their salary information, whether on salary schedules or through a salary output file. Sunnyside, Pretoria, Tel: +27 80 011 7669 Allocating receipts:  The GEPF captures and allocates receipts for payment to the debtor accounts daily. Employers in this sector typically contribute just 2.9% of the typical £29,451 salary into workers’ pensions, equivalent to £589 a year. The information is available by the third week of every month for the month concerned.Information is also received from SARS and South African Social Security Agency (SASSA). GEPF Administration Office Following up on discrepancies: This step is aimed at correcting overpayments and underpayments. Currently, about 98 percent of all participating employers are electronic contributors. Corner Meintjies and Francis Baard Street Deducting the instalments due: The runs takes place on the last weekend of the month. So if you have this cover, then make sure your 'expression of wishes' form is up to date. Pension Terminations . Some employers match dollar for … Some of these employers also do not use a payroll interface or the Persal or Persol Transversal Systems, and instead use manual processes to interact with the GEPF.   Contributions to an employee’s Personal Retirement Savings Account (PRSA) are a benefit in kind.. Employers are urged to familiarise themselves fully with the GEP Law and the rules of the Fund so that they are aware of the cost implications of offering enhanced benefits. Obviously, this leads to lower payouts, but hardest hit are higher-paid employees and those who received strong salary increases during their careers. Following up on discrepancies: This step is aimed at correcting overpayments and underpayments. From April 6, 2019, the minimum employer contribution level increased to three percent. We also check that receipts have been correctly captured and that any employer refunds have been properly processed. Persal or Persol deduction: On a monthly basis, the employer would deduct the Purchase of Service instalment against the member’s salary and pay it over to the GEPF. As well as a pension based on your income and years of membership, some final salary pension schemes -- notably in the public sector -- provide lump sums linked to your length of service. However, this 'withering' of pension schemes has taken place almost exclusively in the private sector. So a career lasting 40 years would get you 40/60ths (two-thirds) of your final salary as your starting pension. Good practice is for the employer contribution to be double that of the employee. It used to be final salary based, but for new people it's average salary, which I think is fair enough. In other words, for each complete year of membership, you earn another 1/60th of your wage as a pension. The GEPF has a clearly defined contribution management process for receiving, reconciling and reporting on manual payments. Your employer pays: You pay: The Government adds tax relief of: Total contribution: From 6 April 2019: 3.0% of your qualifying earnings: 4.0% of your qualifying earnings : 1.0% of your qualifying earnings : 8.0% of your qualifying earnings : 6 April 2018 to 5 April 2019: 2.0% of your qualifying earnings: 2.4% of your qualifying earnings : 0.6% of your qualifying The President or Premier of a province is appointing a person whose service is not recognised as pensionable service; and/or. Reconciliation: The amounts received are reconciled with the amounts owing. The employer currently contributes at a rate of 16% of pensionable salary in respect of “services” members and 13% in respect of “other” members, reflecting the differences in the benefit structure of these two categories of members. This has led to many organisations curbing or even closing altogether their pension schemes. This explains why many people pay additional voluntary contributions (AVCs) into their occupational pensions, Do you want to comment on this article? Reconciliation: One month in arrears, reconciliation is performed to reconcile payable instalment and amount allocated. The Fund has a clearly defined contribution management process for receiving, reconciling and reporting on these payments. For those earning over £150,000 and thus paying 50% tax, a £100 contribution costs a mere £50. Lilah says: 23 September 2015 at 12:54 If my gross salary is R14000. The additional costs are referred to as an “additional liability” and will be claimed back from the employer by the GEPF. What this means is that they don't pay a penny into their pensions, as their benefits are provided solely by contributions from their employer (usually the taxpayer). Copyright © lovemoney.com All rights reserved. Normally members are given a three-month period before instalments are deducted. For medical 4474 will always equal 3810 as the … Manual contributors are employers who need to apply to GEPF’s Board of Trustees to become participating employers. The joy of a final salary scheme is that the employer takes all of the investment risk and longevity risk (how long you'll live), while promising you a pension based on your years of service and salary on retirement. A few lucky individuals -- including members of the Armed Forces -- are members of non-contributory pension schemes. Discharge is in the interest of the employer. COMPANY REG NO: 7406028 VAT NO: 945 6954 72. By that introduction, the Pension Reform Act (PRA) 2014 allows employees to make voluntary contributions into their Retirement Savings Accounts in addition to their mandatory pension contributions. Contributions received are checked from the 8th day of the month to determine which contributions are outstanding for the calculation of interest on late payment. For example, your scheme may have a pension accrual rate of 1/80th, plus 3/80ths towards a lump sum. Two decades ago, most large private sector employers offered final salary pensions to new joiners. If your employer offers a pension, they can decide to terminate it. However, many employers prefer to match your contributions £1 for £1, known as 100% matching. How big these pensions get depends on four things: Let's briefly look at the first two factors: Ideally, you want your employer to be as big-hearted as possible by footing most of the bill for providing you with a retirement income. Every month, an automated run is done to raise instalments from the capital amount and add interestas per GEPF’s quotation. This is because pensions are simply future pay, so not joining a good pension plan is like turning down a pay rise -- every year, for life. In most cases, your employer pays the premiums for this insurance, so it's free to you. Even so, some generous employers still offer final salary pensions to new joiners, including Tesco and the John Lewis Partnership (owner of John Lewis and Waitrose). In fact, after your basic salary (and bonus, if you get one), the most important factor to consider when weighing up a job offer is the pension you'll get. The last part of the reconciliation process is to calculate the contributions outstanding for the month. Otherwise, your lump sum from life insurance could be paid to an ex-spouse, for example! It is now law that most employees must be enrolled into a workplace pension scheme by their employer. Some generous employers pay a flat percentage of your pay into your pension, even if you don't contribute a penny. However, SARS applies a discretionary allowance to increase tax-deductible contribution rates of up to 20% of employment income. On the other hand, more than nine in ten public sector employees get gold-plated pensions. A contribution would not be allowable if there is an identifiable non-business purpose for the employer's decision to make the pension contribution or for the size of the contribution. Following up on discrepancies: This step is aimed at correcting overpayments and underpayments. TaxTim says: 22 March 2016 at 16:15 If you personally contribute to the pension fund then there should be a source code 4001 and 4472 (assuming the employer contributes as well) and you would need to ask the employer as to why there is no 4475 - if the employer is adding a fringe benefit and taxing you on it then they should show the 4475. GEPF bases late payment interest on the Repo rate + 3%. Tax-deductible employee contributions to pension funds are permitted to the extent of 7,5% of taxable income. Your employer must contribute the minimum amount if you earn more than: £520 a month; £120 a week; £480 over 4 weeks The 8% increase to overall pension contributions this year means that employers must contribute at least 3% to pension pots, and the remaining 5% has to be made up by employees. A typical final-salary scheme offers an 'accrual rate' of 1/60th. Employers are required to pay the monthly deductions over to GEPF by the seventh day of the following month. This calculator will show you how much will be paid into your pension by you and your employer. Far-reaching new legislation has been introduced which will make non-payment of retirement fund contributions by employers a criminal offence – and financial officers and directors can be held personally liable. In some cases, this no-strings payment could be 10% or even 15% of your before-tax salary. However, many employers prefer to match your contributions £1 for £1, known as 100% matching. Manual contributors have different options for paying pension contributions over to GEPF. According to Section 17 of the Government Employees Pension Law (GEP Law), if an employer pays its employees enhanced pension benefits that constitute an additional liability to the Fund, the employer will be held liable for the extra costs. Employers also make sure that the information that the GEPF has on their employees is accurate and up to date. Where I work at the moment if we contribute 8%, our employer contributes a whopping 18%. The GEPF checks that the salary information is complete and valid. The Fund has a clearly defined process for receiving, reconciling and reporting on the Purchase of Service payments, as follows: Raising the amounts payable by the employer: This information comes from the monthly salary information obtained from Persal or Persol. Having reviewed defined benefit schemes, now let's look at their inferior alternative: defined contribution or money purchase schemes. 2009, c. 19 allows for a deferral of 50% on normal contributions and accrued liability. Allocating receipts: The GEPF captures and allocates receipts for payments to the debtor accounts daily; however, to finalise this process for a specific month the receipts must be captured and allocated by the 10th of the next month to the relevant Purchase of Service suspense account, in preparation for reconciliation. GEPF bases late payment interest on the Repo rate + 3%. The amount you must contribute to the pension scheme is determined by the scheme’s rules. Persal is the payroll system used in most national and provincial government departments, while Persol is the system used in the uniformed services. Building 2A, Trevenna Campus Contributions received are checked from the 8th day of every month to determine which contributions are outstanding for the calculation of interest on late payments. If it is not, the GEPF follow up with National Treasury’s Transversal Systems. GEPF members are allowed to increase their pensionable service by purchasing additional service. Your actual pension contribution percentage is: 6.6% Your actual pension contribution is: £2,309 a year or £192.43 a month. Now only one in nine (11%) of the UK's 23 million private sector workers belong to schemes paying final salary pensions. Tax-free employer contributions to pension funds are limited to 10% of employment income. Should no response be received, the matter is followed up and then escalated in terms of GEPF’s Debt Collection Policy. You may pay a once-off or special pension contribution after the end of a tax year, but before the following 31 October. The last part of the reconciliation process is to calculate the contributions outstanding for the month. However, to finalise this process for a specific month, the receipts must be captured and allocated by the 10th of the next month in preparation for reconciliation. (As reduced by any employee contributions to the pension scheme relating to the employment.) In this situation, your accrued benefit usually becomes frozen, which means you'll get whatever you've earned up to that point, but you cannot accumulate any additional pension income. If you're lucky, your scheme will have a lower-than-average retirement age. Non-contributory, final salary pension schemes are as rare as hen's teeth these days, so if you ever get the opportunity to join one, then do so without delay. This is submitted to GEPF management and the Board’s Benefits and Administration Committee. Alas, thanks to their sky-high running costs, these have all but died out in the private sector. If you put more than this into your pension, you won’t receive tax relief on any amount over the contribution limit. An employee is discharged because his or her post is abolished. They can submit salary schedules or create a salary output file/payroll interface which uses the same file layout as the Persal data set. Each month, the employer deducts the Purchase of Service instalment against the member’s salary and pays it over to GEPF. These lump sums are a very valuable benefit and should never be overlooked when comparing schemes. Employers are required to pay the monthly pension contributions to GEPF by the 7th day of the following month. What's the best employer pension contribution / matching you've seen? While most still link to the RPI (Retail Prices Index) measure of inflation, many schemes are switching to the lower CPI (Consumer Prices Index). Pension contributions Employer contributions to an approved occupational pension scheme (OPS) on behalf of employees are a not a benefit in kind in their hands. If you’ve voluntarily enrolled in a workplace pension. What's more, as these policies are written 'in trust,' they are paid to a deceased employee's beneficiaries free of all taxes. Non-Payment of Pension Contributions Law a Significant Business Risk for Employers . This means that the amount you save into your pension is really important, as it will determine the level of income you can … Raising late payment interest: On a monthly basis, GEPF calculates late payment interest based on the Repo rate+ 3%. In theory, an employer can pay any amount of pension contribution to a registered pension scheme for their employees, regardless of their salary. Fax: +27 12 326 2507, Employers who are electronic contributors, Collecting Purchase of Service instalments, GEPF ANNUAL RESULTS AS AT FINANCIAL YEAR-END MARCH 2020, Africa’s largest pension fund appoints new Principal Executive Officer, GEPF Chairperson Refutes Holomisa Allegations, GEPF congratulates Abel Sithole on his appointment. As well as contributing according to a "You pay X%, we pay Y%" formula, you can also make additional contributions to your workplace pension. The Fund recovers these payments through a monthly instalment deduction or once-off payment. For a higher rate (40%) taxpayer, a £100 contribution costs £60. The actuaries send GEPF the calculations, actuarial letters and a list of members. There are also a number of other situations where additional liabilities could arise, for which the employer must pay. If you do, you can choose, on or before 31 October, to have the tax relief for the contributions allowed in the earlier tax year. EC1Y 8AE, LOVEMONEY.COM LIMITED IS A REGISTERED COMPANY IN ENGLAND & Wales. Some generous employers pay a flat percentage of your pay into your pension, even if you don't contribute a penny. You need to be signed in for this feature, 36 Featherstone Street Following up on discrepancies: The reconciliation is performed to identify defaulting members. This means that, all else being equal, RPI-linked pensions are more valuable than CPI-linked pensions, as the RPI rises faster than the CPI. Data published today (September 26) showed savers made an average contribution into their pensions of £2,700 in 2017/18, almost £200 less than in … When adjustments have to be made, letters are sent to members.Reporting on the results: A monthly status– debts record, report is submitted to GEPF management. However, more generous schemes do allow retirement at 60 (or earlier, if due to ill health or redundancy). When collecting additional liability claims from employers, the GEPF uses the following process: Raising the amounts payable by the employer and member: This is done every quarter, after the actuaries have calculated the amounts owing. While a 401(k) may offer an employer match, the onus is on the employee to contribute enough to a 401(k) to financially support themselves in retirement. Those working in the accommodation and food service industries don’t have much to cheer about either when it comes to their employers’ pension contributions. Employers with Persal or Persol have the advantage of a single electronic interface with GEPF, whether for admitting new members, collecting contributions or maintaining members. Raising of late payment interest: Each month, GEPF calculates late payment interest based on the Repo rate+ 3%. All members of the Fund contribute at a rate of 7.5% of pensionable salary. The average employer in private sector schemes is between 7% and 14% depending on the scheme. A part of the reforms that have taken place in the Nigerian Pension Scheme is the introduction of voluntary contributions. Contributions must be paid by the seventh day of the following month regardless of which payment option an employer chooses to use. In other words, your pension isn't linked to the peak salary you earned in your final year, but is based on the average wage throughout your service. Status reports are submitted to GEPF management. Defined benefit schemes lift your pension payments each year, usually in line with inflation. Here are some examples of situations in which the employer would be liable for additional costs: In these examples, the employer carries the cost of the additional liability because the pension contributions paid did not provide for the enhanced benefits. When collecting Purchase of Service instalments, GEPF uses the following process: Raising the amounts payable by the member: Upon approval of the quotation by the GEPF, a debt would automatically be raised on the system. In the public sector, most schemes have a normal retirement age of 60 (55 for the Armed Forces), but the Government is pushing to raise this to 65 for most of its employees. A monthly status report on amounts payable and owing is submitted to GEPF management and the Board’s Benefits and Administration Committee. Non contributory insurance is not subject to the deferral. According to calculations from Hargreaves Lansdown, this means that an extra £30 will leave a worker’s monthly pay to cover the cost of pension contributions. The deferral amount will be amortized for 15 years for payments beginning 2012. 2011, c. 78, Pension Reform, reduces the rate from 11.72% to 11.14%. On receipt of these, GEPF raises the employer debt and sends claim letters to the employers to recover the amounts due. perhaps relying on an annual statement you receive from your employer The employer currently contributes at a rate of 16% of pensionable salary in respect of “services” members and 13% in respect of “other” members, reflecting the differences in the benefit structure of these two categories of members. With a traditional pension plan, your employer is generally responsible for funding your pension. The type of scheme. Each month, the GEPF compiles a status report on contributions payable and amounts owing. Allocating receipts: Any amount received in respect of the debt is allocated against that employer. All participating employers interact regularly with the GEPF. Another valuable benefit provided by many corporate pension plans is life insurance, known as 'death in service' cover. In the public sector it is around 20%. 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