23 May 2018

 

Personal income tax change brings relief to SA take-home pay in April

BankservAfrica’s l

atest take-home pay and private pensions indices point to another consecutive 

month of growth 


South Africans earning below R432 300 per annum received some relief from the revised personal income tax that came into effect at the beginning of April. According to BankservAfrica’s Take-home Pay Index, this amounted to a 1.5% salary increase above inflation in April. The BankservAfrica Private Pensions Index (BPPI) for April also showed a 5% growth for privately banked pensions.

 

“The average take-home salary was R14 681 in nominal terms for April 2018, representing a 5.8% increase on April 2017,” says Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica.  He adds: “In real terms, the average salary was R13 909 – 1.5% higher than a year ago. This is the seventh consecutive month of positive salary increases.”

 

Mike Schüssler, Chief Economist at Economistscoza explains that although the personal tax revision was not the main driver of salary growth, it is still significant that for the first time in two years, the partial tax relief of 3.2% for those with an annual earning of below R432 000 has helped somewhat. “The adjustment of the primary tax rebate helped the South African take-home pay increase slightly more. The personal tax relief in 2018 was far more than the 1% in the 2017 tax year and also slightly higher the 2016 tax relief,” says Schüssler.

 

He warns that the increases may not be as strong in the coming months with the public servants wage negotiations underway. “In addition, the protracted wage talks suggest the implementation of the increases will be delayed, which will have a negative impact on the positive take-home pay trend in the coming months.”

 

Reflecting on April’s take-home pay, Schüssler believes the increases will be evident in the improved retail sales and overall spending during the month. However, the VAT increases may also have a dampening effect.  Furthermore, expectations of inflation trending upwards in the coming quarters may also also see take-home pay increases slowing down.

 

Privately banked pensions in April increased by 5% in real terms, according to the BPPI.

 

“In current prices, private pensions increased by 9% on a year-on-year basis,” says Naidoo.

 

He adds that in nominal terms, the average pension increased to R7 096 in April 2018. This is the third consecutive month in which the average pension payment was above R7 000 for the month.

 

In real terms, the BPPI was R6 865 for the month of April 2018. It is likely that the 3.2% tax relief added a percentage or two to the increase as this was also aimed at income levels at which 99% of pensioners get their pensions. Average private pensions payment was 49.8% of the average take-home salary.

 

“This strong performance is surprising as investment returns have not always been as robust over the last few years,” says Schüssler.

 

He adds that as interest rates are higher than inflation and bond yields, it may be that a more conservative approach to pension investments have paid off.

                                                                                                                                                                                                           

For an expanded explanation please see the full report.

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“The average take-home salary was R14 681 in nominal terms for April 2018, representing a 5.8% increase on April 2017,” says Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica.  He adds: “In real terms, the average salary was R13 909 – 1.5% higher than a year ago. This is the seventh consecutive month of positive salary increases.”

Graph 1:  Real change in Take-home pay and Private Pensions

Source: BankservAfrica and Economists dotcoza

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Mike Schüssler has his sayMarket insights from
Mike Schüssler
Well-known economist Mike Schüssler has partnered with BankservAfrica and analyses our payment information.  Read his report for further commentary:
 

Every day large companies, salary bureaus, remuneration companies, government and data centers send salary data for processing to BankservAfrica. This happens when the transaction occurs between different banks and not within the same bank.

This results in between 4 million and 5.5 million transactions per month, with an average of more than 4.7 million per month over the last year.  Note this number does not reflect the full picture, as some salaries are paid weekly whilst others may be bonus payments. 

The weekly data is adjusted to come up with one figure of what an individual would earn, had they been paid on a monthly basis.  Once this figure was added to those who were paid monthly, it was clear that the BankservAfrica data represented about 3 million people out of a formal work force of about 8.3 million, excluding agriculture, using the Quarterly Employment Survey (QES) from Statistics South Africa as guide.

All social security payments, representing around 3.8 million payments at about R1 000 per month, have been removed from the data set. 

The BDSI is published every second month.