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The GEPF formula for calculating payouts

by | Oct 4, 2022

The GEPF formula for calculating payoutsThe 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.

91 Comments

  1. Hi Maya,

    My father passed away last year we just received payment from Feb and some haven’t as yet.
    The amount my mother got which she is/was married to my father is a bit suspicious taking into consideration that he worked for long period. May you please help in how to calculate this or how they came to the amount ?

    Reply
  2. Hi in case my documents were received by Gepf during the
    month of March how long it will take for pension payout.
    Thanks

    Reply
    • Normally it takes a few months but there was that data breach which did affect work flow so it may longer

      Reply
  3. Hi Maya
    I just want to find out, my stepfather passed away last year August while in service. 4 stepchildren and 1 biological child submitted all required paperwork to GEPF, with proof of bank account etc. We haven’t had any feedback yet on what is happening.
    My question is how long does the process take before payout?
    Because 4 of 5 was dependent of deceased.

    Reply
    • That is a long time – unless someone is disputing the outcome they should have wound it up by now. You can drop me an email with the details

      Reply
      • A couple of years before he married my mother he was married and divorced to another woman. The GEPF wanted the documents of the divorce that also states that neither of them would seek or want anything from the other at any later stage. That was like 25 years ago. The ex wife also signed a affidavit for us now that she wants nothing of his. But still the GEPF wants some other paper that was not with the divorce documents.

        Sorry, stupid question, to which email address can i drop email?

        Reply
  4. Hi I want a statement of how they calculate my payout. I resigned 12 January 2023 and only received my pension now February 2024. Is there someone I can contact to send me a detailed statement of what my pension was and how they got to the amount they payed out?

    Reply
  5. can i comment in afrikaans

    Reply
  6. 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.

    Reply
    • 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/

      Reply
    • Good Day is gepf payment in respect of divorce 50% of the overall or 50% of the duration of the marriage

      Reply
      • 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

        Reply
        • I retired in 2022 and received a grantuity after serving for 7.7 years. And when l retired Gepf used wrong final pensionable salary.
          They used old pensionable salary..R477K instead of R491K

          Kindly indicate if you can help to determine the precise pension pay out that was due to me.

          Kind regards
          Mokoena LA
          082 584 5637

          Reply
          • only the GEPF could give you the exact figures but you can use the formula in the article to get an estimate of how it may change

            Reply
          • The GEPF use the average of the last 24 months of service, not your last notch

            Reply
        • How do the payments work when the beneficiaries/children are all above the age of 21, where does the money go. It gets forfeited or?

          My mother was told she’s the only one who is going to get her 50% share of her deceased husbands pension money and the beneficiaries/children who are all above 21 years wont be recieving anything.
          I am confused as to how that works

          Reply
          • I sent your query to GEPF and got this response:
            In response to this question the beneficiary is not clarifying how long has the pensioner being on pension for. However in responding to it, I will indicate that GEPF’s pension is guaranteed for 5 year or 60 months. What this means is that should a pensioner pass on within these 60 months any balance thereto gets paid to the beneficiaries as per the member / pensioner’s nomination list

            In this case, the member / pensioner can nominate whomever he / she wishes for…whether or not the nominee is over 22yrs provided the member takes care of all his / her financial dependants. When this has been done, as per the above paragraph, whomever is on the nomination list will be entitled to receive his / her portion as per the deceased’s wishes

            However wherein a pensioner passes on after 5 years on retirement, though he / she has been consistently being paid monthly pension every month, it does mean that his / her guaranteed monthly annuities or pension has been depleted, thus there is nothing that gets to be distributed to those listed on the nomination list except non – contributory benefits that gets to be paid to a spouse of the deceased and any other biological or legally adopted child that is under the age of 22years

            Having outlined the above, it does seem like in this query, the response is contained in the above paragraph …..that the deceased was on retirement for more than 60 months, all guaranteed annuities have been paid and depleted, thus nothing to be distributed to nominees and only non – contributory spousal pension could be paid, as all children are above the age of 22 years

            Reply
      • It is important to note that the GEPF carries out a divorce court order which stipulates how you have agreed to split the assets. When you get divorced, assets are divided based on your marriage contract. If you are married out of community of property with no accrual, then there is no division of assets as there was never any community of property.

        However, as Community of Property is the default marriage regime in South Africa, in most cases there will be an allocation of the divorce benefit to the ex-spouse.

        Pension and provident funds are employer-sponsored retirement savings plans that are governed by the Pension Funds Act. According to the Pension Funds Act, the non-member spouse (i.e., the spouse who does not own the pension fund) is entitled to claim a portion of the pension interest accumulated during the marriage.
        The pension interest is calculated using a specific formula outlined in the Divorce Act, which takes into account the period of the marriage, the member spouse’s contributions, and the growth of the pension fund.

        Once the pension interest is calculated, the non-member spouse is entitled to claim a portion of it as part of the division of assets in the divorce. This portion is generally determined based on the principle of equal division, which means that the non-member spouse is entitled to 50% of the calculated pension interest. However, the court has the discretion to deviate from the principle of equal division based on various factors, such as the financial needs and circumstances of the parties involved.

        Reply
  7. 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.

    Reply
    • 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.

      Reply
  8. Hi. Is the Final salary used in the benefit calculator based on gross salary or net salary?

    Reply
      • The 24 month weighted average pensionable salary!

        Reply
    • Can I borrow from my pension if there is a need?

      Reply
    • Hi Maya.

      I’m trying to work out if it would be worth buying additional service years in the GEPF at retirement (I have >10yrs years service) or not.

      In other words, should I just invest the money myself in a money market deposit (and earn a money market interest rate @ say 10%), or ‘invest’ it in my pension by buying additional years and get a higher monthly pension.

      I know each quote to purchase additional service years is personal and different, but in general what you have seen/heard wrt the GEPF, is it more beneficial (ito ROI) to puchase additional service years, or to just invest the money myself?

      (Sorry, last question: I assume the cost to purchase additional years won’t be tax deductible?)

      Thanks Maya!

      Reply
      • I asked Craig Gradidge of https://gminvestments.co.za/ as they work a lot with GEPF members. He responded that “it is quite bespoke and dependent on the member’s specific circumstances. Which is why the fund actuary is often called on to do these calculations. Intuitively I expect that it is worthwhile doing so, given that the income yield from GEPF is so much higher than what the member could earn in the market. If the member has a long retirement term the benefit is significant”.

        In terms of tax deduction, you can can invest up to 27.5% of your income so it would depend how much of that is already being used. Probably not the full 27.5% so there could be a benefit. It is also a good idea to have additional discretionary funds for retirement – such at a Tax Free Savings Account. I would recommend you speak to a financial planner who has experience with GEPF – GMI is a good start.

        Reply
        • What happens when you are a 1xbeneciary and 1× dependant how does it work

          Reply
          • The trustees will consider a legal or financial dependant first and then look at beneficiaries that are not dependants

            Reply
  9. 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

    Reply
  10. 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

    Reply
    • 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.

      Reply
  11. 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

    Reply
    • 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.

      Reply
  12. 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?

    Reply
    • Yes, I am fairly certain of that based on the GEPF handbook – but I will ask them specifically

      Reply
    • Good morning. I would like to know if I will receive the employer’s contribution on resignation from GEPF.

      Regards

      Reply
      • yes you receive the resignation benefit on your benefit statement less tax – there is a lot of tax paid unfortunately

        Reply
      • I worked 35 years as a teacher but only received R1 million on retirement and I feel I’m still being owed by the GEPF.what must I do to claim all monies due to me?

        Reply
        • Is the R1 million the gratuity and do you still receive a monthly income? Have you tried the self service portal?
          The GEPF website also has a benefits calculator.

          Reply
  13. 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?

    Reply
    • You would need to confirm with your HR but the instructions refer to “Insert all salary periods and salary notches”

      Reply
  14. Hi Maya is there a formula to calculate the “pre 98” non taxable amount?

    Reply
      • Hi Maya is it possible for Gepf to pay only for one child and not the other?

        Reply
        • It depends on ages – it would provide for a minor child but not necessarily a child over 22 years of age

          Reply
      • How to transfer your lump sum to a preservation fund when you resign from gepf

        Reply
        • 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

          Reply
    • hi maya is there a formula for the pre 98
      non taxable amount

      Reply
      • I haven’t come across one – have you tried GEPF website?

        Reply
    • Gepf- average salary for last 24 months is used in the formula. There is a formula available for calculating pre- 1998 tax free portion

      Reply
      • How do you calculate the average salary notch for the last 2 years as the gepf determine your lumpsum and monthly pensioen on an average of the last 2 years salaries.

        Reply
        • you add them together and divide by 24 months. The GEPF website does have the formula

          Reply
  15. 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

    Reply
  16. Can you calculate my pension if I retire at 55 yeras

    Reply
  17. 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?

    Reply
    • 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.

      Reply
  18. 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?

    Reply
    • 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

      Reply
  19. 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

    Reply
    • You would need to ask your HR. It would not be much after such as short period of time

      Reply
      • 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

        Reply
        • It is best to get the figures from your employer. You can also try the GEPF App

          Reply
  20. 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.

    Reply
    • 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.

      Reply
      • Thank you it is all sorted now. it was just a small error on their side

        Reply
    • 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

      Reply
      • 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

        Reply
        • 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.

          Reply
          • I am assuming this is in the case of a resignation? Your HR department would need to assist you in giving the final figure

            Reply
    • Hi wonder if the documents are at payment section how lond does it take for GEPF to make payments.

      Reply
      • If all documentation is in and the pension is approved the payment should not be more than 60 days

        Reply
  21. Pĺs update me on how far is my divorce payout

    Reply
    • This is not a GEPF website, you would need to contact the GEPF for details

      Reply
    • 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?

      Reply
    • 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.

      Reply
      • 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

        Reply
        • Thanks a lot Maya for your example it’s clear to me now how much I will receive my gratuity and my monthly annuity. I workedout it with 6.72% and 1/55 and I get my monthly salary when retired on 60 yrs thank you

          Reply
          • great, keep in mind the final figures will be determined by final salary etc, but it does give you some indication

            Reply
            • Hi I resigned 31 March 2024 and I was served with garnish order for child maintenance after I have resigned will this affect my pension payout

              Reply
              • This is the response from the GEPF:

                If the GEPF is in the process of processing his claim then the garnish will affect his pension payout but if we already paid his pension, the court could garnish his bank account.

                Reply

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Maya Fisher-French author of Money Questions Answered

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