Reconciliation: In the last week of the month, the GEPF does a financial reconciliation to check that there is a match between amounts received and amounts payable. The deferral amount will be amortized for 15 years for payments beginning 2012. In other words, for each complete year of membership, you earn another 1/60th of your wage as a pension. Employers are required to pay the monthly pension contributions to GEPF by the 7th day of the following month. Discharge is in the interest of the employer. If you’ve voluntarily enrolled in a workplace pension. Your actual pension contribution is: £2,309 a year or £192.43 a month. 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.. Currently, about 98 percent of all participating employers are electronic contributors. It used to be final salary based, but for new people it's average salary, which I think is fair enough. 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. However, many employers prefer to match your contributions £1 for £1, known as 100% matching. These amounts are collected by their employer and are paid directly to GEPF. They can submit salary schedules or create a salary output file/payroll interface which uses the same file layout as the Persal data set. Employers also make sure that the information that the GEPF has on their employees is accurate and up to date. If you put more than this into your pension, you won’t receive tax relief on any amount over the contribution limit. The GEPF checks that the salary information is complete and valid. This calculator will show you how much will be paid into your pension by you and your employer. 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). 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 … 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. 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. For a higher rate (40%) taxpayer, a £100 contribution costs £60. 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 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. COMPANY REG NO: 7406028 VAT NO: 945 6954 72. Every month, an automated run is done to raise instalments from the capital amount and add interestas per GEPF’s quotation. Following up on discrepancies: This step is aimed at correcting overpayments and underpayments. Otherwise, your lump sum from life insurance could be paid to an ex-spouse, for example! From April 6, 2019, the minimum employer contribution level increased to three percent. Electronic interaction is possible when an employer uses the National Treasury’s transversal systems, Persal or Persol, to administer its salaries. Some generous employers pay a flat percentage of your pay into your pension, even if you don't contribute a penny. Non contributory insurance is not subject to the deferral. 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. 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. 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. By Kobus Hanekom, 24 March 2014. 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. This is submitted to GEPF management and the Board’s Benefits and Administration Committee. In some cases, this no-strings payment could be 10% or even 15% of your before-tax 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. Your employer must contribute the minimum amount if you earn more than: £520 a month; £120 a week; £480 over 4 weeks In order to reduce the ongoing cost of running guaranteed pension schemes, many employers have switched from final salary to career average payouts. All members of the Fund … However, more generous schemes do allow retirement at 60 (or earlier, if due to ill health or redundancy). The amount you must contribute to the pension scheme is determined by the scheme’s rules. 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. 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. However, employees enrolled in pension plans may elect or be required to contribute to the plan. They pay pension contributions over to the Fund every month and notify the fund when new members are being admitted and existing members are withdrawing. 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. In these schemes, just 20 years of service would earn you a guaranteed pension worth two-thirds of your final salary. An employee is discharged because his or her post is abolished. Manual contributors are employers who need to apply to GEPF’s Board of Trustees to become participating employers. 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. Defined benefit schemes lift your pension payments each year, usually in line with inflation. 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 Administration Office If your employer offers a pension, they can decide to terminate it. For a basic rate taxpayer, a £100 pension contribution costs £80, thanks to 20% tax relief. 2009, c. 19 allows for a deferral of 50% on normal contributions and accrued liability. So if you have this cover, then make sure your 'expression of wishes' form is up to date. Following up on discrepancies: This step is aimed at correcting overpayments and underpayments. Final salary plans are the 'gold standard' of pension schemes. However, the most generous schemes -- usually open only to directors, top executives and senior managers -- can offer accrual rates as high as 1/30th. On receipt of these, GEPF raises the employer debt and sends claim letters to the employers to recover the amounts due. For those earning over £150,000 and thus paying 50% tax, a £100 contribution costs a mere £50. 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. You may pay a once-off or special pension contribution after the end of a tax year, but before the following 31 October. A few lucky individuals -- including members of the Armed Forces -- are members of non-contributory pension schemes. Raising late payment interest: On a monthly basis, GEPF calculates late payment interest based on the Repo rate+ 3%. The last part of the reconciliation process is to calculate the contributions outstanding for the month. Persal is the payroll system used in most national and provincial government departments, while Persol is the system used in the uniformed services. The actuaries send GEPF the calculations, actuarial letters and a list of members. 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. 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. However, this 'withering' of pension schemes has taken place almost exclusively in the private sector. Each month, the GEPF compiles a status report on contributions payable and amounts owing. All participating employers interact regularly with the GEPF. (3) P.L. A typical final-salary scheme offers an 'accrual rate' of 1/60th. Contributions to an employee’s Personal Retirement Savings Account (PRSA) are a benefit in kind.. Copyright © lovemoney.com All rights reserved. Now only one in nine (11%) of the UK's 23 million private sector workers belong to schemes paying final salary pensions. Having reviewed defined benefit schemes, now let's look at their inferior alternative: defined contribution or money purchase schemes. 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. (As reduced by any employee contributions to the pension scheme relating to the employment.) The information is captured on Excel spreadsheets. 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. Typically, this will give you, say, three to four times your salary if you die in service. In some cases, this no-strings payment could be 10% or even 15% of your before-tax salary. The last part of the reconciliation process is to calculate the contributions outstanding for the month. 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. Each month, we compile a status report on contributions payable and amounts owing. Reconciliation: The amount deducted from the member’s debt as an instalment is set off against the amount deducted from the member’s salary as reflected on Persal and or Persol. perhaps relying on an annual statement you receive from your employer Pension Terminations . All members of the Fund contribute at a rate of 7.5% of pensionable salary. Raising late payment interest: Once interest on late payments has been calculated, letters are sent to the employers to inform them accordingly. However, SARS applies a discretionary allowance to increase tax-deductible contribution rates of up to 20% of employment income. This explains why many people pay additional voluntary contributions (AVCs) into their occupational pensions, Do you want to comment on this article? 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. GEPF bases late payment interest on the Repo rate + 3%. In most cases, your employer pays the premiums for this insurance, so it's free to you. If you're lucky, your scheme will have a lower-than-average retirement age. 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. Good practice is for the employer contribution to be double that of the employee. There are also a number of other situations where additional liabilities could arise, for which the employer must pay. GEPF members are allowed to increase their pensionable service by purchasing additional service. 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