The Government Employees Pension Fund (GEPF) is a defined benefit fund. This means the pension received by a member has nothing to do with the investment performance of the fund. A member’s pension payout is determined according to the GEPF formula.
GEPF members receive a once-off gratuity and a recurring annuity income, with the amounts based on their final salary and years of service. The member’s final salary is calculated by taking the average salary in the last 24 months of service.
GEPF pays the annuity income for the lifetime of the member and guarantees an annual increase of 75% of inflation, although it could be higher.
GEPF pensions automatically include a 50% spousal pension if the member is married when they pass away. This means the spouse would continue to receive 50% of the pension. The member has an option at retirement to increase this to 75%.
The GEPF pension is guaranteed for 60 months. This means that if the member were to pass away within five years of retiring, the full remaining income from inception is paid to the beneficiaries, until the 60 months have passed.
The GEPF formula
The once-off gratuity and the amount of the annual annuity income is calculated according to the following formula:
- Gratuity = 6.72% x final salary x years of pensionable service
- Annual annuity = (1/55 x final salary x years of pensionable service) + R360
The following scenarios highlight the importance of not resigning and not cashing in your pension, because the GEPF formula places significant value on the number of years of service.
Scenario one: Final salary R400 000 with 35 years of service
- Gratuity = 6.72% x R400 000 x 35 years = R940 800
- Annual annuity = 1/55 x R400 000 x 35 years + R360 = R255 000 per annum (R21 250 per month)
This is an income replacement ratio of around 65%. In other words, the retiree would receive an income equal to around 65% of their final monthly salary. For the first five years, the annual annuity is guaranteed to be paid out in full, even if the member passes away. This means that the pension will pay out at least R1.27 million in income (excluding inflation increases).
In comparison, a retiree would need to have R4.1 million in fund value to receive the same gratuity/lump sum and income from a with-profit annuity issued by a life insurance company. This is based on a 60-year-old with a spousal pension of 50% and a ten-year guarantee period.
Scenario two: Final salary R400 000 with 20 years of service
- Gratuity = 6.72% x R400 000 x 20 years = R537 600
- Annual annuity = 1/55 x R400 000 x 20 years + R360 = R145 800 per annum (R12 150 per month)
This is an income replacement ratio of around 36%. The retiree would receive an income equal to around 36% of their final monthly salary.
In comparison a retiree would need R2.34 million in fund value to receive the same gratuity/lump sum and income from a life insurance company. This is based on a 60-year-old with a spousal pension of 50%.
This article first appeared in City Press.
I wanted to know if is wise to claim all the pension money from gepf or leave the pension with gepf so that they can pay you monthly pension.
At retirement you do not have an option to take all the funds. You would have to resign. If you do not transfer to a preservation fund then you would pay a very large amount of tax. One option is to take your full gratuity at retirement and invest that and then live off the income from the GEPF. You may find this article useful https://mayaonmoney.co.za/2021/10/beware-bad-advice-at-retirement/
Good Day is gepf payment in respect of divorce 50% of the overall or 50% of the duration of the marriage
The GEPF does not determine the divorce benefit – any any divorce benefit is agreed on as part of the divorce settlement and based on your marriage regime. If the divorce agreement included a percentage of the retirement fund, those papers are given to GEPF to implement
It is incorrect that benefit payouts and pension increases are unrelated to gepf aum performance! Gepf confirmed that aum performance determines the increases. The latest actuarial report confirmed that and recommended reduced resignation payouts! 20%/R 660k in my friend’s case! Over 12 years since 2011 gepf paid cpi plus 0.04% in the greatest bull run in history.
Correct, RESIGNATION benefits are affected by performance and other factors including salary increases and exiting members. The RETIREMENT benefit is calculated based on the formula you will find on the website. In retirement, pension increases are related to performance, however, it can never be less than 75% of CPI. If performance is a major issue and the fund cannot pay out the 75% of CPI then taxpayers would foot the bill.
Hi. Is the Final salary used in the benefit calculator based on gross salary or net salary?
Gross salary
The 24 month weighted average pensionable salary!
Can I borrow from my pension if there is a need?
No, you cannot borrow from the GEPF.
HI, MAYA I APPLIED FOR MY LATE MOM PENSION LAST YEAR 3RD NOVEMBER 2023, SHE PASSED AWAY IN 26 JULY 2014. AND THE DOCTOR HAD ALREADY PUT HER ON EARLY RETIREMENT, AND SHE WAS 21 YEARS IN SERVICE. I WANT TO KNOW IF I WILL ONLY RECEIVE GRATUITY ONY OR I WILL GET THE ANNUITY ALSO
Only a spouse would receive the annuity. It would also depend how long she was in retirement for. It is only if she passed away in the first five years of retirement would there be any funds left for the beneficiary. https://mayaonmoney.co.za/2021/10/gepf-pension/
What are the rights of a wife who is married in community of property and not nominated in the form after her husband death, can somebody who is the brother get the large sum than the wife
The allocation of the death benefit is determined by the trustees – while they may be informed about potential beneficiaries on the nomination form, they would first consider legal and financial dependents which means his spouse would receive the full spousal amount.
What are the rights of a wife who is married in community of property and not nominated in the form after her husband death, can somebody who is the brother get the large sum than the wife
When it comes to death benefits of a retirement fund, it is important to note that while your nomination form can assist the trustees in identifying and contacting beneficiaries, the trustees are still obliged to identify all legal or financial dependants and ensure that the death benefit is distributed equitably amongst the dependants.
If for example the nominated beneficiaries are not financially dependent on the deceased and there are other financial dependants not included on the form, the nominated beneficiaries may receive no money. Only in cases where there are no legal or financial dependants do the trustees distribute death benefits in line with the beneficiary nomination.
The trustees will do an investigation into the dependence of any surviving legal dependants. Legal dependants include a spouse, parents, children, etc. However, anyone who can prove that they were financially dependent on the deceased has a rightful claim on some of the proceeds. This could include a child from another relationship, a parent or even another partner that was financially supported by the member.
Once the trustees have identified all the dependants, they distribute the benefits according to the level of dependence. For example, if a member of the fund was married and had one adult child who was employed, then the spouse would receive the full benefit. However, if the child was still living at home, or studying, and therefore dependent on the deceased, then they could have a claim. This does assume that there were no other dependants. Minor children from other marriages or relationships would also be considered in the dependency assessment.
Hi Maya
I assume that the final salary is the pensionable portion of the Cost to Company package in terms of government salary scales/notches. Can you please confirm?
Yes, I am fairly certain of that based on the GEPF handbook – but I will ask them specifically
Hi. I just wanted to know what values you used in your calculations as “final salary”. Is this the net monthly salary after tax or is it the notch? Which part of the payslip do I input into this variable if I were to use your calculations?
You would need to confirm with your HR but the instructions refer to “Insert all salary periods and salary notches”
Hi Maya is there a formula to calculate the “pre 98” non taxable amount?
I haven’t seen one on GEPF
Hi Maya is it possible for Gepf to pay only for one child and not the other?
It depends on ages – it would provide for a minor child but not necessarily a child over 22 years of age
How to transfer your lump sum to a preservation fund when you resign from gepf
you would need to take out a preservation fund with an investment company – for example 10x, Allan Gray, Ninety One etc. They would then assist you with the process. You would need to inform the GEPF
hi maya is there a formula for the pre 98
non taxable amount
I haven’t come across one – have you tried GEPF website?
Gepf- average salary for last 24 months is used in the formula. There is a formula available for calculating pre- 1998 tax free portion
Hi my mom has worked for health department at government for 20 years as a sister,she is retirering at 62 how much is she going to get gratuity and lumpsum
It is best she asks HR
Can you calculate my pension if I retire at 55 yeras
only your employer can calculate that for you
My wife passed away 2021 on 3 January and I’m not satisfied for the pension I got because the years she worked at health
You can lodge a query at the GEP Ombud. https://mayaonmoney.co.za/2021/08/gepf-establishes-complaints-handling-office/
There is a penalty of about 4% pa on the gratuity and annuity up to age 60. So a person taking retirement at 55 will be penalized by 20%
Dear Maya
I trust that you are well.
My mother has been an educator for the past 38 years, & she decided to retire at the end of February. She is extremely frustrated by this GEPF process. May I ask, what is the nature of payments a retiree expects to get upon retirement, if they opt to “leave their money with the GEPF”? I’m talking about the initial lump sums here. I understand that there is a gratuity as well as a “leave days” payment?
If she retires with the GEPF she would receive a lump sum plus an income for life. These are based on years of service and final salary (over the last 24 months). Alternatively she can resign, receive a lump sum based on the market value of the fund and move the funds to a preservation fund which she in turn coverts into a life or living annuity. I have looked at the comparable rates and what pensioners receive from GEPF as an income is quite a bit higher than what they can purchase as a retail client. But the admin is a pain – the issues sit largely with the employer.
Hi,I worked for a year in Punlic and have not claimed GEPF benefits,it’s been 18 yrs. would the benefits increase if I were to claim?
You would need to find out if you ever contributed to the GEPF. You would have to have been a member of GEPF during your period that you worked there
Dear Maya
I have been an educator for 1 year and two moths. How will I know how much I will get if I were to claim my pension
You would need to ask your HR. It would not be much after such as short period of time
Dear Maya. I am 63 years old with 43 years of service. I am going to retire at 65years and with 45 years and six months of service. My Notch is R578841.00 and monthly salary of R48236. 75 .I want to know how much I going to receive monthly after SARS tax deduction
It is best to get the figures from your employer. You can also try the GEPF App
Hi Maya, My wife recently passed away last year September, i applied for life-partnership from GEPF, on the 13 Feb 2023 i was told the life partner application was approved but today 16 February 2023 i was told legal has sent an opinion so it has not been approved yet, when my wife passed away she was on the 10th year of her service in Government, now am confused as why was it approved at first place and now there is legal opinion.
I am sorry for your loss. Unfortunately I cannot comment on this as I don’t work for GEPF. The only thing I can think of is that someone else contested your right to the pension. If there are other family members or a child, for example, they may argue against your claim. but if they change their opinion and you are not happy about it you can take it to the GEP Ombud.
Thank you it is all sorted now. it was just a small error on their side
I would like to know that if I intend to resign from the department with 31years 6 months, how much I am going to receive
Your latest benefit statement would reflect an amount but you need to deduct tax. you could lose up to 40% on tax. If you do resign consider moving the funds to a preservation fund to avoid tax
Hi, I just wanted to inquire about the calculations if I want to draw all my funds and transfer to a ra. How can I calculate that total amount transferable.
I am assuming this is in the case of a resignation? Your HR department would need to assist you in giving the final figure
Hi wonder if the documents are at payment section how lond does it take for GEPF to make payments.
If all documentation is in and the pension is approved the payment should not be more than 60 days
Pĺs update me on how far is my divorce payout
This is not a GEPF website, you would need to contact the GEPF for details
Am resigning at a gorvement institutions and i have 2 years service with an annual of R260000. And i struggle to use your formula. Please help out in my calculations?
It would be based on your benefit statement. It is best you ask your HR department or use the App. With only two years service, the amount would be very small.
https://mayaonmoney.co.za/2021/09/self-service-facility-for-gepf-members/
Good day Marta my wife passed away in December 2022 in November 2022 the process of bored her for medical reasons . She didn’t pay her first payment before she passed away in 7 December 2022.Now I’m trying to apply a spouse benefits will you please explain to me.
I am sorry for your loss. If she worked for less than 10 years she would have been entitled to a lump sum (gratuity). If more than ten years she would have received a gratuity plus a monthly pension (annuity). As a spouse you would be entitled to 50% of the annuity. Best to speak to her employer to find out the details. Also check if the gratuity had been paid out or not