Pensions in South Africa: A Comprehensive Guide

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This article provides an overview of pensions in South Africa, including details of the state pension system, eligibility criteria, and different types of pensions available for expats and residents. While some expats may be eligible for a South African pension, many rely on private or occupational-based pensions due to income restrictions.

The guide covers various topics, including social security contributions, supplementary pensions, survivor’s pensions, and pension advice in South Africa. It also includes information on applying for a pension in South Africa and useful resources for those seeking further information.

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The South African Pension System

The South African pension system is based on a three-pillar system. The first pillar is a non-contributory means-tested grant the South African Social Security Agency (SASSA) provides to most pensioners. The second pillar includes various insurance-based employee and company pensions and provident funds. The third pillar consists of private pensions and insurance arrangements.

The SASSA Grant for Older Persons is the South African equivalent of a state pension and is means-tested. Tax contributions fund the grant, provided to those with income and assets below a certain threshold. These grants go to approximately 75% of the elderly population. In December 2018, nearly 3.6 million old age people received grants. More than 17 million people in South Africa receive some form of grant from SASSA.

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Despite the existence of the pension system, the Mercer Global Pensions Index ranks South Africa’s state pension in 28th place out of 33 countries in the 2018 report. The ranking indicates that the pension system has some good features and major risks. The Government Employees Pension Fund (GEPF) and the Government Pensions Administration Agency (GPAA) administer pensions for their primary clients, the National Treasury and the GEPF.

Who is eligible for South African pensions?

Pension age in South Africa

The minimum age for the state pension in South Africa is 60 years old for both males and females. However, there is no specific retirement age in law. The actual retirement age often depends on the eligibility rules of the individual’s workplace pension fund. Members of the public sector who receive a South African pension through the Government Employees Pension Fund (GEPF) may have the option of retiring early if they have given at least 10 years of service.

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Who can claim a state pension in South Africa?

The South African Social Security Agency (SASSA) Grant for Older Persons is available to South African citizens, permanent residents, and refugees. It is also available to those granted political leave to remain. To claim this South African pension, pensioners must have earnings of less than R78,120 per year if single or R156,240 per year if living with a spouse, and have assets worth no more than R1,115,400 if single or R2,230,800 if living with a spouse. The means test determines if pensioners meet the income and asset limits.

As this grant is means-tested rather than contribution-based, pensioners do not have to have lived or worked in South Africa for any period of time to claim it. However, the South African government has been discussing abolishing the means test or changing the threshold to provide incentives for private retirement savings and reduce the burden on the state. As of yet, no changes have been introduced.

In conclusion, South African citizens, permanent residents, and refugees who meet the means test are eligible for the SASSA Grant for Older Persons. The minimum age for the state pension is 60 years old, but the actual retirement age often depends on the eligibility rules of the individual’s workplace pension fund.

Pensions for Expats in South Africa

QROPS: Transfer and Consolidate Your UK Pension

Expats who have invested in a private pension scheme in the UK may be able to transfer their pensions into a Qualified Recognised Overseas Pension Scheme (QROPS). This scheme allows them to consolidate their pensions into one plan, making managing their retirement funds easier and avoiding currency fluctuations.

QROPS has many advantages; however, it may not be suitable or available to all UK pensioners. It is recommended to take advice from an expert financial adviser such as AES before making decisions regarding QROPS.

South Africa doesn’t impose any tax on overseas pension schemes, so transferring private pension earnings without incurring charges through an overseas pension scheme may be possible. For UK pensioners in South Africa, QROPS is a viable option for transferring their pensions.

It is important to note that South Africa has no reciprocal social security agreement with any country other than the Netherlands. However, as the South African state pension isn’t contribution-based, this shouldn’t pose too much of a problem.

Expats ineligible for the grant-based pension in South Africa can opt for a contributory occupational-based pension (if employed) or a private retirement fund. It is important to check how payments from state pensions overseas might be affected, as you may only be able to claim a flat-rate pension that doesn’t rise annually in line with inflation rates back home.

How to Apply for a Pension in South Africa

To apply for a grant-based means-tested South African pension, individuals must visit their local SASSA office and submit an application. Applicants must bring their 13-digit bar-coded identity document. If an applicant does not possess an ID, they will need to provide a sworn statement signed by a reputable person who can verify their name and age.

Additionally, applicants must provide proof of residence, evidence of marital status (if applicable), proof of income/savings, proof of assets and pension (if any), and bank statements for the last three months. If the applicant was employed, they must provide their last employer’s Unemployment Insurance Fund book or discharge certificate.

If an applicant’s spouse died within the last five years, they must provide a copy of the will and accounts where applicable. To apply to join GEPF, an applicant must complete a Z125 form.

Details of local offices around South Africa are available on the SASSA website.

South African Pension Rates and Contributions

The South African Social Security Agency (SASSA) provides a grant to elderly citizens with no other income source. The current maximum pension rate is R1,780 per month, increasing to R1,800 for those over 75 years old. The grants are funded through national income tax and are intended to provide a minimum income to those in need. SASSA pays the grants directly into the recipient’s bank account, by cash at the local SASSA office, or directly to the institution for those who live in care or residential accommodation.

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