What is non-pensionable income?

Non-pensionable income is that part of your income which does not attract a compulsory contribution to your employer’s pension or provident fund.

If you do not belong to a workplace retirement fund, then all your income would be non-pensionable. Alternatively, if only your basic salary is pensionable, other remuneration such as commissions, bonuses and overtime would be considered non-pensionable. The earnings of self-employed people, as well as taxable rental and interest income are also non-pensionable.

The concept of non-pensionable is no longer so relevant. It was important in the past (until 29 February 2016) because the tax deduction on your RA contributions was limited to 15% of your “non-pensionable income”. There was no rand cap on the amount you could claim, provided it was no more than 15% of your non-pensionable income.

The new tax laws have done away with the distinction of pensionable and non-pensionable income in the context of your RA. While the required contribution to your employer’s pension or provident fund is still based on your employer’s definition of “pensionable income”, this no longer defines what you can claim in respect of your RA contributions.

Instead, the new rules provide that you can claim RA contributions against your entire income. You may claim contributions up to 27,5% of your total income, subject to an annual limit of R350,000. Note however that these annual limits apply to the total value of your contributions to all your retirement funds (pension, provident and RA funds).