Maybe you’ve been contributing to a retirement for five years or 15 years or you just started. Do you know how much of your pay goes to your retirement fund each month? Or whether your contribution is enough to replace your salary when you retire?
Who sets your contribution rate?
Your contribution rate is the percentage of your salary that goes into your retirement fund every month. Some employers also contribute towards employees’ retirement funds.
South Africa has no rule requiring an employer to offer a retirement fund or to pay a set amount. Each fund has its own rules, agreed between the employer and the fund, which decide how much you pay in and how much your employer adds.
That means two people doing similar jobs at different companies could have very different rates. One employee might pay 7.5% while their employer adds 9%. Another might get no employer contribution at all. Always check your payslip or ask HR what your fund’s rules say.
Why 15%+ is the aim
Financial industry guidance suggests that saving around 15% of your salary consistently, from age 25 to 65 (a 40-year working life), can help you reach a retirement income equal to about 75% of your final salary.
In practice, most South Africans fall short. Research found that roughly 80% of retirement fund members contribute less than the recommended 15%, with a large group sitting between 10% and 14.9%.
CASE STUDY
Meet Anathi. She’s 25, earns R10 000 a month, and has just started her first job, which comes with compulsory retirement fund membership. Like most workers, she has never questioned how much of her pay goes into the fund each month, and whether her contribution is enough to replace her salary when she retires. Note how a small increase in her monthly contribution rate, kept up over decades, makes a real difference to what she will have to live on in retirement.
The takeaway
You do not need to overhaul your finances overnight. Start by finding out your own contribution rate. It is on your payslip or your fund’s benefit statement. If you can afford to increase it by even 1% or 2%, that adds up over time.
Your retirement fund is one of the few tools that quietly works in your favour, decade after decade. Take five minutes this week to find out where you stand.
These are illustrative projections only, based on a steady 5% real annual return, and actual results will vary. The values are approximate.
Sources
BusinessTech: Retirement shock for South Africa
CMS: Expert Guide to Pensions in South Africa
Old Mutual: The contribution challenge
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All content is for general educational purposes and does not constitute formal financial advice. Always consult a qualified, licensed financial professional before making any financial decisions.