Question:
Current pension fund and retirement annuity deductions compared to new deductions show calculations of R300 000 remuneration, 15% total employer and employee contributions. Retirement annuity, R1 750 per annum. Please show calculations to explain the changes. Thanks
Answer:
Ayden,
Currently, on R300 000 remuneration (pensionable income), the employer can deduct and claim R60 000 (20%) contributions in respect of either a provident fund or a pension fund and the employee can deduct a further a further R22 500 (7.5%) in respect of a pension fund (but not for a provident fund). No further deduction allowed for retirement annuity contributions as entire income is pensionable. retirement annuity contributions can only be deducted against non-pensionble income.
Under the new regime, only the employee can claim contributions (even if made by the employer), The contribution cap is 27.5% of the greater of gross remuneration or taxable income, and applies to all types of retirement funds in totality, capped at R350 000 per annum. On R300 000, you can therefore claim deductions up to R82 500 pa, which can be spread over a pension, provident or RA fund as you wish. The concept of non-pensionable income falls away.
