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. For a higher rate (40%) taxpayer, a £100 contribution costs £60. A monthly status report on amounts payable and owing is submitted to GEPF management and the Board’s Benefits and Administration Committee. Where I work at the moment if we contribute 8%, our employer contributes a whopping 18%. 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. 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. 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. In other words, for each complete year of membership, you earn another 1/60th of your wage as a pension. 2009, c. 19 allows for a deferral of 50% on normal contributions and accrued liability. As well as contributing according to a "You pay X%, we pay Y%" formula, you can also make additional contributions to your workplace pension. Members have to apply for this andif theGEPF approves their application for the Purchase of Service, they must pay the approved amount with interest. 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. Having reviewed defined benefit schemes, now let's look at their inferior alternative: defined contribution or money purchase schemes. In some cases, this no-strings payment could be 10% or even 15% of your before-tax salary. 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. Manual contributors are employers who need to apply to GEPF’s Board of Trustees to become participating employers. In these schemes, just 20 years of service would earn you a guaranteed pension worth two-thirds of your final salary. Defined benefit schemes lift your pension payments each year, usually in line with inflation. The Fund recovers these payments through a monthly instalment deduction or once-off payment. Employers are required to pay the monthly pension contributions to GEPF by the 7th day of the following month. All members of the Fund contribute at a rate of 7.5% of pensionable salary. However, SARS applies a discretionary allowance to increase tax-deductible contribution rates of up to 20% of employment income. Non contributory insurance is not subject to the deferral. 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. Your actual pension contribution percentage is: 6.6% Following up on discrepancies: This step is aimed at correcting overpayments and underpayments. Tax-free employer contributions to pension funds are limited to 10% of employment income. Raising late payment interest: On a monthly basis, GEPF calculates late payment interest based on the Repo rate+ 3%. 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). 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. Alas, thanks to their sky-high running costs, these have all but died out in the private sector. This has led to many organisations curbing or even closing altogether their pension schemes. 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. 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. It is now law that most employees must be enrolled into a workplace pension scheme by their employer. If you’ve voluntarily enrolled in a workplace pension. A check is made to confirm that receipts have been correctly captured and that any employer refunds have been properly processed. Status reports are submitted to GEPF management. Manual contributors have different options for paying pension contributions over to GEPF. Each month, we compile a status report on contributions payable and amounts owing. COMPANY REG NO: 7406028 VAT NO: 945 6954 72. Should no response be received, the matter is followed up and then escalated in terms of GEPF’s Debt Collection Policy. Good practice is for the employer contribution to be double that of the employee. A typical final-salary scheme offers an 'accrual rate' of 1/60th. Now only one in nine (11%) of the UK's 23 million private sector workers belong to schemes paying final salary pensions. While most still link to the RPI (Retail Prices Index) measure of inflation, many schemes are switching to the lower CPI (Consumer Prices Index). An employee is discharged because of an injury or ill-health that came about in the course of his or her employment. The average matching contribution is 4.3% of the person's pay. GEPF Administration Office Sunnyside, Pretoria, Tel: +27 80 011 7669 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. Some employers match dollar for … There is good news, however. (As reduced by any employee contributions to the pension scheme relating to the employment.) 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. Raising late payment interest: Once interest on late payments has been calculated, letters are sent to the employers to inform them accordingly. 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. Today, the vast majority of these schemes have been shut down to new joiners. In most cases, your employer pays the premiums for this insurance, so it's free to you. For a basic rate taxpayer, a £100 pension contribution costs £80, thanks to 20% tax relief. 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. 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. Employers also make sure that the information that the GEPF has on their employees is accurate and up to date. This interaction can take place electronically or manually, depending on the salary administration system that each employer uses. You may pay a once-off or special pension contribution after the end of a tax year, but before the following 31 October. This is submitted to GEPF management and the Board’s Benefits and Administration Committee. Otherwise, your lump sum from life insurance could be paid to an ex-spouse, for example! Following up on discrepancies: This step is aimed at correcting overpayments and underpayments. EC1Y 8AE, LOVEMONEY.COM LIMITED IS A REGISTERED COMPANY IN ENGLAND & Wales. 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. They can submit salary schedules or create a salary output file/payroll interface which uses the same file layout as the Persal data set. In some cases, accrual rates are 1/80th, so working four decades would earn you a pension worth half of your salary. Some generous employers pay a flat percentage of your pay into your pension, even if you don't contribute a penny. If you put more than this into your pension, you won’t receive tax relief on any amount over the contribution limit. Allocating receipts:  The GEPF captures and allocates receipts for payment to the debtor accounts daily. 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). Following up on discrepancies: The reconciliation is performed to identify defaulting members. Employers are required to pay the monthly deductions over to GEPF by the seventh day of the following month. (2) P.L. A major survey of 6,430 Defined Contribution pension schemes throughout Ireland, undertaken by the IAPF in advance of their annual Defined Contribution Pension Conference on Tuesday, has found that the average total contribution being paid in amounts to just 11.1% of salary – with an average of 5.7% coming from the employer and 5.4% from employees. These amounts are collected by their employer and are paid directly to GEPF. 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. Corner Meintjies and Francis Baard Street What's more, as these policies are written 'in trust,' they are paid to a deceased employee's beneficiaries free of all taxes. Employers in this sector typically contribute just 2.9% of the typical £29,451 salary into workers’ pensions, equivalent to £589 a year. Final salary plans are the 'gold standard' of pension schemes. Persal is the payroll system used in most national and provincial government departments, while Persol is the system used in the uniformed services. GEPF bases late payment interest on the Repo rate + 3%. Since the late Nineties, occupational (workplace-based) pension schemes have been under attack as employers cut their costs. On the other hand, more than nine in ten public sector employees get gold-plated pensions. 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. Workplace pension contribution calculator. 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. The additional costs are referred to as an “additional liability” and will be claimed back from the employer by the GEPF. However, many employers prefer to match your contributions £1 for £1, known as 100% matching. The last part of the reconciliation process is to calculate the contributions outstanding for the month. 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