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Create and add pension fund benefits in Sage Payroll and HR (ZA)
Create and add pension fund benefits in Sage Payroll and HR (ZA)

How to set up a Pension fund in Sage Payroll (South Africa only)

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Written by Thandiwe Khoza
Updated over a year ago

Your employees may want to access an employer-sponsored pension plan. They also have a legal responsibility to pay into a public pension.


Before you start

Before you can add a pension contribution to your employees, you will need to :

  • create an employee

  • create a pay run


Types of funds

The value of the fringe benefit is determined by the type of retirement fund. There are three types of funds: defined contribution, defined benefit and hybrid funds.

Defined contribution

This is a fund that consists solely of defined contribution components. Contributions towards this fund can be directly linked to the benefit the member is entitled to.

The fringe benefit value is equal to the actual employer contribution towards the defined contribution fund.

Defined benefit

Defined benefit funds have retirement benefits that are calculated according to the rules of the fund where the value of the contributions to the fund may not be an accurate reflection of the benefits that may be received by the retirement fund member.

The monthly fringe benefit value is calculated with a formula:

X = (A X B) - C

Where:

X - Represents the fringe benefit amount to be determined.

A - Represents the fund member category factor in respect of each employee. This is obtained from the fund.

B - Represents the retirement-funding income of the employee (see ‘retirement funding income’).

C - Represents the sum of the amounts contributed by the employee to the specific fund in terms of the rules of the fund in respect of the year of assessment.

This will only include the actual employee contribution and not the deemed employee contribution. The additional voluntary contributions made by the employee or “buy- back” to purchase additional years of service, is not included in the value of ‘C’.

Hybrid Fund

These funds consist of a combination of components (defined contribution, defined benefit, underpin, and/or risk components).

The value of the fringe benefit is calculated with the same formula which is used to calculate the fringe benefit for a defined benefit fund. The fund calculates a category factor that takes all the components into account.

This factor is applied to calculate the monthly fringe benefit.

Read more regarding Retirement funds on our Tax Guide which can be found on our website:
https://www.sage.com/en-za/support/digital-tools/


Adding pension fund

To create pension contributions for an employee you will first need to add the pension fund to the benefit funds on the maintenance tab.

  1. Select Maintenance from the menu.

  2. Select Benefit Funds.

  3. Click on Add New Benefit Fund on the top right-hand side.

  4. Select the Fund Type from the drop-down as a Pension fund.

  5. Enter the Fund Name.

  6. You can enter a clearance number, but this is not mandatory.

  7. Select a Contribution Type from the drop-down as specified by your fund.

  8. Select the Calculation Based on the drop-down and select the appropriate option as specified by your fund.
    (Depending on the option that you selected you will have to fill in different fields, you will need to fill in all the remaining fields based on the information obtained from the fund).

  9. Select Save.


Adding a pension fund for employees

You will need to add the pension fund to the employees by selecting Employee from the menu.

  1. Click on the Benefits Fund section on the left-hand side.

  2. Click on the Add a Benefit Fund option on the top right-hand side.

  3. Select the created pension fund from the Benefit Fund drop-down.

  4. Enter a Start Date for the employee on the fund.

  5. The End Date can be left as is if there is no specified end date.

  6. Depending on what you selected when setting up the pension fund you will now need to either enter the percentage of the employee and employer portion or the amount of the employee and employer portion.

  7. Save the changes.

The employee and the employer benefit options that have been setup will automatically be added to this employee's pay run.

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