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Chapter 12

PERSONNEL MATTERS

12.17 FORMULAS FOR CALCULATING PENSION AND LUMP SUM FOR EDUCATORS

12.17.1Legislative and Policy Framework

ACTS

  • The South African Schools Act, No. 84 of 1996 [SASA]
  • The National Education Policy Act, 1996 (Act No. 27 of 1996) [NEPA]
  • Employment of Educators Act 76 of 1998 [EEA]

GUIDELINES

  • Personnel Administration Measures [PAM]

12.17.2Framework for the Development of School Policy on Educators

Also see: SAOU 21/2017 National Newsletter – GEPF Divorce, Information and Beneficiaries

  1. Formulas for calculating pension and lump sum for educators
    • Pension contributions
      Educators who are allowed to be members of the State Pension Fund, contribute 7,5% of their salaries to the fund.
    • Termination of employment on medical grounds
      In a case of long illness, the Head of Education may determine that an educator may retire or the educator may submit such a request in the prescribed manner.  The educator’s retirement benefits are calculated according to the formula provided later.  The Head of Education acts on recommendations of the Health Risk Manager.
    • Payment of retirement benefits from the State Pension Fund
      For the calculation of all formulae, the term “end salary” is defined as the average salary notch of the member’s last 24 months of service.
    • Termination of service (less than 10 year’s pensionable service)
      If the service of a member with less than 10 years’ pensionable service is terminated for any of the following reasons:

      • Health reasons not due to own actions;
      • Abolishment or re-organisation of the post;
      • If the termination will make the Department more effective;
      • Inability to perform duties, misconduct excluded; or
      • Due to an injury or ill health caused by an accident during or as a result of the member’s duties, but not due to the member’s own actions;
        • A gratuity calculated as follows is payable:
        • 15.5 x end salary x pensionable years of service
          100
        • This amount is increased by a third, except in case of inability to perform duties effectively.
    • Termination of service (pensionable service of 10 years or more)
      If the service of a member with more than 10 years’ pensionable service is terminated for the reasons mentioned above, the following gratuity is payable:
      (a) A gratuity calculated as follows:

      6.72 x end salary x pensionable years of service
      100

    (b) Annuity calculated as follows:

    1 x end salary x pensionable years of service + R360
    55

As for:

    • Health reasons not due to own actions;
    • Abolishment or re-organisation of the post;
    • If the termination will make the Department more effective;
    • misconduct; or
    • Due to an injury or ill health caused by an accident during or as a result of the member’s duties, but not due to the member’s own actions;
      one third of the period of pensionable service up to a maximum of 5 years, or the difference between the person’s age and 60 years, whichever is the smallest, is added.
  1. Retirement (less than 10 years’ pensionable service)
    If a member retires with less than 10 years’ pensionable service:

    • On or after the retirement date;
    • Before retirement age in terms of the Act that regulates the conditions of service; or
    • As a result of the expiry of the service contract, a gratuity is payable equal to the actuarial value of the member’s pension.
  2. Retirement (10 years’ pensionable service or more)
    • If a member retires with more than 10 years’ pensionable for a reason mentioned in 3 above, the following is payable:
      (a) A gratuity calculated as follows:

      6.72 x end salary x pensionable years of service
      100

    (b) Annuity calculated as follows:

    1 x end salary x pensionable years of service + R360
    55
  3. If a member has reached the age of 50, but not 60, the above benefits are reduced by .33% for each month between the member’s age and 60 years.
  4. Members should note that only educators appointed before 1 May 1996 and who have more than 10 years’ pensionable service, may retire between the ages 50 and 55. (The reduction of 4.2 is applicable)
  5. Resignation
    Resignation benefits are calculated according to the following formula:

    • Educators below 55 years:
      Number of pensionable service years x end salary x F(z)

      Age F(z)
      54 0.2451
      53 0.241
      52 0.2369
      51 0.2331
      50 0.2294
      49 0.2263
      48 0.2233
      47 0.2204
      46 0.2176
      45 0.215
      44 0.2125
      43 0.2102
      42 0.208
      41 0.2062
      40 0.2027
      39 0.2005
      Age F(z)
      38 0.1983
      37 0.1961
      36 0.1939
      35 0.1917
      34 01895
      33 0.1873
      32 0.1851
      31 0.1834
      30 0.1818
      29 0.1801
      28 0.1785
      27 0.1768
      26 0.1752
      25 0.1735
      24 0.1719
      23 0.1702
    • Educators above 55 years:
      Gratuity + [A(x) x Annual pension would receive]

      Age A(x)
      55 12.3302
      56 12.1524
      57 12.0555
      58 11.9641
      59 11.7526
      60 11.5293
      61 11.8003
      62 11.9488
      63 11.9136
      64 11.7826
      65 11.6517
    • A member may request that an amount equal to the actuarial value, calculated according to the relevant formula, is transferred to an approved retirement fund or preservation fund at resignation. Enquiries may be directed to the nearest SAOU office.
    • A member loses the following benefits at resignation, namely leave credit, pro-rata service bonus, medical-, housing subsidy and funeral benefit.
  6. Benefits at the death of a member:
    • Members with less than 10 years’ pensionable service: A gratuity is payable to the greatest of the member’s actuarial value and end salary.
    • Members with 10 years’ and more pensionable service receive the following:
      (a) A gratuity calculated as follows:

      6.72 x end salary x pensionable years
      100

    (b) Five times the retirement amount he/she would have received at retirement calculated as follows:

    5x 1 x end salary x pensionable years of service + R360
    100
  7. For calculation of the abovementioned gratuities, one third of the period of pensionable service, to a maximum of 5 years or the difference between the person’s age and 60 years, whichever is the smallest, is added to the years of service.
  8. Spouse’s pension
    If a member is survived by his or her spouse, a spouse’s pension is paid to the spouse equal to half the annuity the member would have received if he or she had retired at the age of 60 years.
  9. Benefits at the death of pensioners
    • If a pensioner passes away within 5 years of retirement, a benefit is payable to the spouse or dependants equal to the sum of the annuity payable, as calculated from the first day of the month following the death up to the last day of the month in which the 5 year period expires.  The formula is as follows:
      1 x end salary x pensionable years of service x unexpired months of 5 years
      55
  10. If a pensioner is survived by a spouse, a spouse’s pension is payable equal to half of the annuity that the pensioner received at his or her death unless, at retirement, the pensioner chose a lessened monthly pension or a lessened annuity. In the last two instances (lessened monthly pension or lessened annuity) 75% of the monthly pension is payable as spouse’s pension.
  11. Tax on retirement benefits
    • Pension gratuities (Resignation benefits excluded)
      Tax on pension gratuity (single amounts) is phased in from March 1998 and is calculated according to completed years of service. Exemption amounts are involved for the different ways of retirement.
    • Monthly pension
      Monthly pension benefits are taxed according to the normal tax scales.
  12. Payment on funeral benefits
    As from 1 December 2002 the following members qualify for the payment of a single amount as funeral benefit at the death of:

    • A serving, contributing member of the GEPF (R7500);
    • A pensioner retired on or after 1 December 2002 (R7500);
    • A Spouse/life partner of 1 or 2 above (R7500) and
    • A dependant eligible child of 1 or 2 above (R3000)
    • In cases of a still birth, provided that the mother had been pregnant for at least 26 weeks or more.