New rules for provident funds (2024)

FAQs

What is the new law for provident fund in South Africa? ›

The 2022 Draft Revenue Laws Amendment Bill contains key amendments on retirement reform to move towards a “two-pot” retirement system. The amendments enable South Africans to also save for non-retirement purposes (e.g. emergencies) via their retirement funds, whilst preserving more of their savings for retirement.

So, while it is safe to assume that you will be able to access nearly 100% of your funds when you retire from your provident fund, any contributions and growth on those contributions after March 1 2021 (the non-vested portion) will be subject to a maximum cash commutation of one-third and the remaining two-thirds will ...

Employee Contribution to EPF

The employee contributes 12 percent of his or her basic salary along with the Dearness Allowance every month to the EPF account. For example: If the basic salary is Rs. 15,000 per month, the employee contribution shall be 12 % of 15000, which comes to Rs 1800/-.

FROM 1 MARCH 2021, retirement benefits from provident funds will be treated in the same way as pension funds. The changes mean that members will have to buy a pension (living or life annuity) from a registered insurer with at least two-thirds of their retirement benefit unless the total benefit is R247 500 or less.

Interest on contributions of over ₹ 2.5 lakh is taxed from the employee yearly. The contribution threshold is increased to ₹ 5 lakh if an employer is not contributing towards the EPF of an employee. Only the excess contribution above the threshold is taxed, not the total contribution itself.

You get the company contribution invested in your fund plus the net investment return earned thereon (ie you get your full fund balance - net of any tax that may be due - when your resign).

What can we do? You should receive your provident fund payout within 21 days if your tax affairs are in order and all the required documents (such as a copy of your ID, a completed instruction form stating where the money should go, and proof of banking details) have been sent to the fund by your employer.

Benefits on resignation

When a member resigns or is discharged from government service, he or she receives a resignation benefit. The GEPF offers two options for the payment of the resignation benefit: Have it paid into a bank account as a cash lump sum; or. Transfer it to an approved pension preservation fund.

If you resigned mid-month, the fund would only receive your last contribution around month end, so the dealt is not as long as you imagine. Assuming your tax affairs are in order, a pay-out usually takes around 4-8 weeks from that point.

If no cash lump sum is taken, your full benefit will be paid monthly, resulting in a higher pension. As a member of a provident fund, you can choose to take your entire retirement benefit as a lump sum. A portion of this may be tax-free, but you will be taxed on the portion that is not exempt.

What is minimum provident fund? ›

Employer's Contribution towards EPF

The minimum amount of contribution to be made by the employer is set at a rate of 12% of Rs. 15,000 (although they can voluntarily contribute more). This amount equals Rs. 1,800 per month.

If you have registered your UAN with EPFO (Employee Provident Fund Organisation), you can check your PF balance quickly by sending an SMS. All you need to do is send a text message to 7738299899. The text message should include 'EPFOHO UAN ENG.'

SARS does not use your retirement fund lump sum to deduct tax that you owe in respect of income - this is not permitted by the Pension Funds Act. But SARS does require you to submit outstanding returns and pay amounts that are long overdue before issuing your tax clearance certificate.

While the main aim of a pension is to give you an income throughout your retirement, you have the flexibility to take out lump sums whenever you want from the age of 55 – and, in most cases, up to 25% of the total value of your pension can be withdrawn tax free.

You can withdraw money from your IRA at any time. However, a 10% additional tax generally applies if you withdraw IRA or retirement plan assets before you reach age 59½, unless you qualify for another exception to the tax.

Contribution to be paid on up to maximum wage ceiling of 15000/- even if PF is paid on higher wages. 2. Each contribution is to be rounded to nearest rupee. (Example for each employee getting wages above 15000, amount will be 75/-) 3.

The contribution of an employer towards the employee's EPF account is 12% of the salary (basic salary+ dearness allowance+ retaining allowance). The maximum salary limit on which the employer's contribution is calculated is capped at Rs. 15,000.

The labour ministry may be looking to expand the coverage of the employers' provident fund to millions of workers by increasing the wage ceiling for mandatory EPF benefits to ₹ 21,000 a month. The wage ceiling for mandatory EPF benefits is currently set at ₹ 15,000.

To claim your benefit, you must have resigned or retired from your employer. You must then complete a withdrawal notification form, and submit this, with required supporting documentation, to your HR department.

For retirees, taking a lump sum is entirely voluntary. However, behavioral economists have found that people tend to value money that's right in front of them over money they will get in the future, even if the total over time would be greater.

How much will I be taxed if I resign? ›

When you resign, you are allowed access to only R25,000 tax free – a SARS regulation. Any amount over that is taxed at a significant 18%. Withdraw more than R660,000, your tax rate is 27%, and 36% on amounts over R990,000.

All employees drawing a salary are eligible for EPF. Moreover, it is compulsory for all employees earning less than ₹15,000 to register for the EPF. However, employees earning more than ₹15,000 can also voluntarily stay in the EPF scheme.

In a sense, the benefits of a pension fund are more like an annuity, while the benefits of a provident fund offer considerably more payout flexibility. The other major difference lies in the compulsory nature of all provident fund contributions.

Death while in service:The benefit paid is based on the member's period of pensionable service. It is payable to the beneficiaries of the deceased member or, if there are no beneficiaries, to the member's estate.

If your retirement plan is a 401(k), then you get to keep everything in the account, even if you quit or are fired. The money in that account is based on your contributions, so it's considered yours.

After you leave your job, there are several options for your 401(k). You may be able to leave your account where it is. Alternatively, you may roll over the money from the old 401(k) into either your new employer's plan or an individual retirement account (IRA).

At the time of its closure last December, Provident wiped tens of thousands of existing customers' loans, saying it would no longer collect repayments – though it continued to accept mis-selling claims until 28 February 2022.

While it's usually ideal to provide a notice of at least two weeks before resigning from a job, it's not always possible. There are several valid reasons to resign from a job without a notice period. These include: Personal crisis.

The average Social Security income per month in 2021 is $1,543 after being adjusted for the cost of living at 1.3 percent. How To Maximize This Income: Delay receiving these benefits until full retirement age, or age 67.

How many types of provident fund are there? ›

Employees' provident fund is classified into 4 categories: Statutory Provident Fund, Recognized Provident Fund, Unrecognized Provident Fund and Public Provident Fund.

Any organisation that has 20 or more employees is liable to maintain a provident fund account for its employees. There is no limit to the employees' contribution to PF, he can contribute up to 100% of his Basic + DA (PF Wages) towards PF, but it must be a minimum of 12 per cent of the same.

In Union Budget 2021-22, the finance minister announced capping of tax-free annual PF contributions to ₹2.5 lakh to avail tax-free interest income, but later raised this limit to ₹5 lakh for such funds where employers do not contribute, a move that benefited only government employees, the two said on condition of ...

Under the current rules, any company with more than 20 employees must register with the EPFO and the EPF scheme is compulsory for all employees earning less than ₹15,000. The increase in the limit to ₹21,000 will bring more workers under the retirement scheme.

Give a missed call to 011-22901406 from your registered mobile number. After placing a missed call, you will receive an SMS with your PF details.

https://www.epfindia.gov.in IS THE ONLY OFFICIAL WEBSITE OF EPFO.

Payment instead of notice.

The employer also has the right to refuse such a request from the employee. What payments can I expect when I resign ? Generally, upon resignation or dismissal, an employee is entitled to be paid the notice pay where applicable, salary up to last day worked, plus any outstanding leave pay.

R91,250 if you are younger than 65 years. If you are 65 years of age to below 75 years, the tax threshold (i.e. the amount above which income tax becomes payable) is R141,250. For taxpayers aged 75 years and older, this threshold is R157,900.

To check your EPF account balance, you have to send an SMS to 7738299899. The message needs to be sent in this format: EPFOHO UAN. To receive this message in any other language other than English, the first three characters of the preferred language need to be added along with the message.

How can I avoid tax on my pension withdrawal? ›

The short answer is, yes you can. There are lots of reasons you might want to access your pension savings before you stop working and you can do this with most personal pensions from age 55 (rising to 57 in 2028).

In most cases, the lump-sum option is clearly the way to go. The main difference between a lump-sum and a monthly payment is that with a lump-sum option, you get to have control over how your money is invested and what happens to it once you're gone. If that's the case, then the lump-sum option is your best bet.

Take advantage of the rule of 55

This is commonly referred to as the rule of 55. If you want to access all of your retirement savings, you can roll over old 401(k)s and IRAs into your current 401(k) just before you separate from service. Then, when you leave your job, you can start making withdrawals without penalty.

A 401(k) hardship withdrawal is allowed by the IRS if you have an "immediate and heavy financial need." The IRS lists the following as situations that might qualify for a 401(k) hardship withdrawal: Certain medical expenses. Burial or funeral costs. Costs related to purchasing a principal residence.

It is important to note that there is no compulsory preservation before retirement (i.e., an employee who leaves employment at any time before retirement may choose to take the full balance as a cash lump sum, less tax), and there are no current proposals to change this.

Member contribution: minimum 5.25% of member's monthly pensionable salary. Employer contribution: minimum 5.25% of member's monthly pensionable salary.

Section 37C regulates the distribution and payment of a lump sum benefit payable on the death of a member of a pension fund, provident fund, pension, provident preservation fund, and retirement annuity fund, also known as a death benefit.

What can we do? You should receive your provident fund payout within 21 days if your tax affairs are in order and all the required documents (such as a copy of your ID, a completed instruction form stating where the money should go, and proof of banking details) have been sent to the fund by your employer.

Who must pay provident fund? ›

By law employers must pay across contributions deducted from employees to the provident fund on a monthly basis. When contributions to the Fund are outstanding for 60 days, members of the Fund will be notified via sms.

If your employer offers a provident fund, and, you, as a new employee, are eligible to join, then you must join the fund. If you are already an employee of the company when the provident fund is launched, then you are not obliged to join the fund.

Your employer cannot force you to take out such a product unless they made this a term of your employment before you joined. They cannot impose this on you afterwards. This is different from joining an employer who offers a pension or provident fund.

How is provident fund calculated in South Africa? The employee contributes 12 percent of his or her basic salary along with the Dearness Allowance every month to the EPF account. For example: If the basic salary is Rs. 15,000 per month, the employee contribution shall be 12 % of 15000, which comes to Rs 1800/-.

SARS does not use your retirement fund lump sum to deduct tax that you owe in respect of income - this is not permitted by the Pension Funds Act. But SARS does require you to submit outstanding returns and pay amounts that are long overdue before issuing your tax clearance certificate.

If no cash lump sum is taken, your full benefit will be paid monthly, resulting in a higher pension. As a member of a provident fund, you can choose to take your entire retirement benefit as a lump sum. A portion of this may be tax-free, but you will be taxed on the portion that is not exempt.

Guaranteed benefits for members and pensioners

Death while in service:The benefit paid is based on the member's period of pensionable service. It is payable to the beneficiaries of the deceased member or, if there are no beneficiaries, to the member's estate.

A Section 14 transfer is the transfer of retirement fund benefits from one retirement fund to another in terms of Section 14 of the Pension Funds Act. Section 14 transfers will either follow the Section 14.1 or 14.8 process.

Regulation 28, issued in terms of section 36(1)(bB) of the Pension Funds Act, protects retirement fund member savings by limiting the extent to which funds may invest in a particular asset or in particular asset classes, and prevents excessive concentration risk.

Benefits on resignation

When a member resigns or is discharged from government service, he or she receives a resignation benefit. The GEPF offers two options for the payment of the resignation benefit: Have it paid into a bank account as a cash lump sum; or. Transfer it to an approved pension preservation fund.

When can I claim my provident fund? ›

To claim your benefit, you must have resigned or retired from your employer. You must then complete a withdrawal notification form, and submit this, with required supporting documentation, to your HR department.

If your tax affairs are in order, the fund should pay out within 14 to 21 days.