A pension is a fund that is often saved in the present for post-retirement bills. Usually, an employer or an employee or both contribute towards the employee pension scheme. Employers are significant contributors to pension schemes. On retirement, the accumulated fund is either given in lump sum to the employee or in parts throughout the pre-stipulated time.
Employee pension funds & schemes have gained popularity and importance over the years due to inflation. Schemes like these help people retire quickly and without any hitches. However, things change with the law and setup in each country. What is different about the scheme here in South Africa? What are some pension scheme benefits that you need to involve in your financial stratification? Let us find out!
Pension System in South Africa
Who is eligible for pension in South Africa?
- Every person that is 60 and above in age is eligible for a pension in South Africa. Even though there is no statutory age for retirement, the general pattern in South Africa is to retire at the age of 55-60 years.
- Foreign nationals or permanent residents, members of the public sector, and South African citizens are eligible for the state pension scheme, based on some terms and conditions.
Public Pension with South African Social Security Agency:
The pension system can be divided into 3 arrangements:
- Most pension seekers get a pension from the South African Social Security Agency (SASSA), which states that a person has to be earning within a decided amount of money to receive this pension.
- Insurance-based or company-granted pensions and provident funds: Employees and employers contribute to a typical money pool, which can later be accessed in the events of emergencies or post-60s.
- Private arrangements: Some financial institutions provide pensions to members who contribute towards their pension schemes and insurances. This is not work-related, and self-employed or non-working young adults too can start with it.
The SASSA Grant for Older Persons is given to the citizens of South Africa on the following grounds:
- Foreigners who are permanent residents or have gained citizenship status.
- Members of the public sector.
- Any person who has earnings below R78,120/year and with assets under R1,115,400
- Anyone whose collective household income with a spouse is below R156,240 and with assets under R2,230,800.
Occupational pensions are popular with people who work in the private sector/formal sector. The occupational pension schemes are based on the contribution of employees. Most employers deduct a specific part of the salary and contribute it to a vast pool of funds known as provident funds. The provident fund is released to the employee on retirement or job change.
Government Employees Pension Fund:
This pension fund is extendable only to the public sector employees. The Government Employees Pension Fund is the largest pension scheme in South Africa. More than 1.2 million members with more than R1.6 trillion funds. It provides excellent benefits like pension, death benefits, resignation benefits, funeral costs, and benefits for surviving spouses.
GEPF members contribute 7.5% of their salary to the fund.
Other types of pensions in South Africa
Survivor’s pension: This pension is granted to the person’s family who died in harness. If an employee dies while at the workplace and is paying work injury insurance, their family gets the employee’s pension.
What are the benefits of a pension plan?
A pension plan provides security and stress-free retirement. Therefore, many individuals who want to take an early retirement can contribute to such schemes and avail benefits of pension plans. The following are some pension plan benefits:
- Employees contributing to the pension scheme are given relaxation in their taxes
- The families are given survivors’ pensions if the employee dies while working.
- Retirement is easier for employees who contribute to pension schemes.
- The employee will get a definite and guaranteed pension in their old age.
Employee pension schemes are essential in today’s world. Even though it is not mandatory, all employers must employ such a scheme for their employees. Pensions provide a blanket of protection to retiring employees. Many schemes in South Africa help benefit both the employers and employees. The most popular pension scheme in South Africa is the Government Employees Pension Scheme. Even though there is no statutory age limit in South Africa, the popular age to retire is 60-65 years.