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Helping an employee save for retirement

Someone earning close to the minimum wage can work for decades and retire with almost nothing saved. No law makes a small employer provide a pension, but you can help, and it costs less than most people think.

Do I have to provide a pension?

No. There is no general legal duty for a small employer or a household to provide a retirement benefit in South Africa. It only becomes a duty if an employment contract, a bargaining council agreement or a fund's rules require it.

The three ways to help

1. Join an umbrella fund through your business

An umbrella fund is a pension or provident fund run by a registered provider that many small employers join together. You and your employee pay in each month, and the provider handles the investment, the records and the payouts. Most also include life or funeral cover.

Most umbrella funds need 5, 10 or 20 members. A few accept a single employee, including households with one domestic worker.

2. Pay into the employee's own retirement annuity

A retirement annuity belongs to the employee, so it stays with them if they change jobs. You can agree to pay into it as part of their pay. Some providers accept debit orders from about R500 a month.

3. A tax-free savings account in the employee's name

Not a pension, but the simplest place to build savings. Anyone can save up to R46 000 a year (from 1 March 2026) and R500 000 in their lifetime, with no tax on the growth and no lock-in. Paying in more than the limit attracts a 40% penalty.

The two-pot system, in brief

Since 1 September 2024, one third of every retirement fund contribution goes into a savings pot that can be withdrawn once a tax year, and two thirds are kept until retirement.

• The smallest withdrawal is R2 000, and it is taxed at the member's marginal rate.
• The member must be registered with SARS to withdraw. Many lower-paid workers are not, so they may need help to register first.
• Small contributions take a while to reach R2 000 in the savings pot, and some funds charge a fee for each withdrawal.

Source: National Treasury, two-pot system FAQ.

An honest word on tax

Retirement contributions reduce income tax, which is the usual selling point. But someone earning below the tax threshold pays no income tax, so for most lower-paid employees the benefit is the savings themselves, not a tax saving.

If you offer a fund: your duty

Once you deduct contributions, you must pay them to the fund within 7 days after the end of the month (Pension Funds Act, section 13A). Late payment is a criminal offence, and the Financial Sector Conduct Authority publishes the names of employers in arrears. Funds that collect by debit order at the start of the month take care of this for you.

Providers that accept small employers

Listed alphabetically, as published by each provider. PayCalc has no arrangement with any of them and receives nothing for this list. Terms change, so confirm the current minimums and fees with the provider.

What PayCalc will do

We are adding a retirement contribution line to payslips and a reminder before the 7 day deadline, so whichever option you choose is easy to keep up. We will not sell or recommend financial products.