Persal is the payroll system used in most national and provincial government departments, while Persol is the system used in the uniformed services. On the other hand, more than nine in ten public sector employees get gold-plated pensions. When moving job or changing employer, it's important to check your future pension entitlements. Now only one in nine (11%) of the UK's 23 million private sector workers belong to schemes paying final salary pensions. Pension Terminations . For a basic rate taxpayer, a £100 pension contribution costs £80, thanks to 20% tax relief. 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 Deducting the instalments due: The runs takes place on the last weekend of the month. Employers in this sector typically contribute just 2.9% of the typical £29,451 salary into workers’ pensions, equivalent to £589 a year. Some generous employers pay a flat percentage of your pay into your pension, even if you don't contribute a penny. Employers are required to pay the monthly pension contributions to GEPF by the 7th day of the following month. So a career lasting 40 years would get you 40/60ths (two-thirds) of your final salary as your starting pension. 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. The average employer in private sector schemes is between 7% and 14% depending on the scheme. In the public sector it is around 20%. 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. Today, the vast majority of these schemes have been shut down to new joiners. The information is available by the third week of every month for the month concerned. The advantage of doing this is you get tax relief at your highest tax rate. Two decades ago, most large private sector employers offered final salary pensions to new joiners. If you put more than this into your pension, you won’t receive tax relief on any amount over the contribution limit. This is submitted to GEPF management and the Board’s Benefits and Administration Committee. Manual contributors have different options for paying pension contributions over to GEPF. GEPF bases late payment interest on the Repo rate + 3%. The current position is that contributions to a pension fund or a non-contributory provident fund, which an employer is required to make in terms of the rules of the applicable fund in respect of its employees, do not constitute a taxable benefit under the Seventh Schedule to the Income Tax Act 58 of … 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 … Contributions must be paid by the seventh day of the following month regardless of which payment option an employer chooses to use. Currently, about 98 percent of all participating employers are electronic contributors. These lump sums are a very valuable benefit and should never be overlooked when comparing schemes. However, many employers prefer to match your contributions £1 for £1, known as 100% matching. Your employer must automatically enrol you into a pension scheme and make contributions to your pension if you’re eligible for automatic enrolment. Otherwise, your lump sum from life insurance could be paid to an ex-spouse, for example! Manual contributors are employers who need to apply to GEPF’s Board of Trustees to become participating employers. 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. GEPF members are allowed to increase their pensionable service by purchasing additional service. 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). A check is made to confirm that receipts have been correctly captured and that any employer refunds have been properly processed. Following up on discrepancies: Defaulting employers are issued with escalation letters as per GEPF’s Debt Collection Policy. Should no response be received, the matter is followed up and then escalated in terms of GEPF’s Debt Collection Policy. 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. And the employer now decides to join a pension fund and will contribute 5% and the other 5% will be a … Lilah says: 23 September 2015 at 12:54 If my gross salary is R14000. Raising late payment interest: On a monthly basis, GEPF calculates late payment interest based on the Repo rate+ 3%. If it is not, the GEPF follow up with National Treasury’s Transversal Systems. 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. The amount you must contribute to the pension scheme is determined by the scheme’s rules. Non contributory insurance is not subject to the deferral. For a higher rate (40%) taxpayer, a £100 contribution costs £60. 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. This is submitted to GEPF management and the Board’s Benefits and Administration Committee. In other words, for each complete year of membership, you earn another 1/60th of your wage as a pension. Doing reconciliation: In the last week of every month, the GEPF does a financial reconciliation to check that there is a match between amounts received and amounts payable. Since the late Nineties, occupational (workplace-based) pension schemes have been under attack as employers cut their costs. A monthly status report on amounts payable and owing is submitted to GEPF management and the Board’s Benefits and Administration Committee. Employers also make sure that the information that the GEPF has on their employees is accurate and up to date. 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. Raising of late payment interest: Each month, GEPF calculates late payment interest based on the Repo rate+ 3%. 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. For example, your scheme may have a pension accrual rate of 1/80th, plus 3/80ths towards a lump sum. 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. 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. The President or Premier of a province is appointing a person whose service is not recognised as pensionable service; and/or. 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. 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. 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. So if you have this cover, then make sure your 'expression of wishes' form is up to date. This interaction can take place electronically or manually, depending on the salary administration system that each employer uses. 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. However, SARS applies a discretionary allowance to increase tax-deductible contribution rates of up to 20% of employment income. Following up on discrepancies: This step is aimed at correcting overpayments and underpayments. With a traditional pension plan, your employer is generally responsible for funding your pension. Electronic interaction is possible when an employer uses the National Treasury’s transversal systems, Persal or Persol, to administer its salaries. 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. In order to reduce the ongoing cost of running guaranteed pension schemes, many employers have switched from final salary to career average payouts. 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. The problem is that tax relief isn’t automatic and it’s up to the employer’s local inspector of taxes whether or not the employer receives tax relief on the whole contribution. The average matching contribution is 4.3% of the person's pay. Should no response be received, the matter is followed up and then escalated in terms of GEPF’s Debt Collection Policy. 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. 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. Or earlier, if due to ill health or redundancy ) obviously, this no-strings could. 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