28 March 2018


Take-home pay declines slightly while private pensions race ahead

February data confirms private pensions’ good growth


Monthly take-home pay reflected a slight decline for February while private pensions continued to outperform, according to BankservAfrica’s latest monthly data.


“Take-home pay increased marginally by 0.5% in real terms on a year-on-year basis compared to the monthly 1.1% registered for January,”according to Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica.  


Take-home pay averaged at R14 502 in February 2018. 


“It is evident that the salaries adjusted for inflation resulted in “bracket creep” into higher personal income tax brackets,” says Schüssler. “Therefore, while employees’ earnings seemed to improve with salary increases, in real terms the movement into higher tax brackets resulted in a more muted growth in take-home pay.” 


Private pensions improve


Average private pensions showed greater growth compared to the rate of increase of take-home pay, growing by 11.5% in February 2018 compared to February 2017. This represents the fastest nominal growth since November 2013, according to Naidoo. 


In nominal terms, the average private pension was R7 029 in February 2018.


After taking inflation into account the private pensions increase stood at 6.8%. This is the highest year-on-year increase BankservAfrica has on record in real terms.


“Considering that the actual inflation rate was only 4% in February, this means that average pensions grew at more than two and a half times the rate of inflation,” says Schüssler.


The typical pension also increased rapidly by 6% in real terms on a year-on-year basis in February 2018.


“One must remember that despite the rapid growth of pensions over the past year as recorded by BankservAfrica, pension growth represents almost half the level of take-home pay. The average pension paid is now 48.9% of the average take-home salary,” explains Schüssler.


However, this still represents a significant growth when compared to January 2013 where the average pension was 43.3% of the average take-home pay.


“Growth in pensions has outpaced wages for some time. This has been a strong trend over the last five years and in part due to the good pension fund performance and pensioners taking a higher percentage of their retirement income to beat inflation,” says Schüssler.


Despite this growth, pensioner incomes are not on par with salaried employees. They are  potentially  less likely to have retirement annuities as well as  home and school fee expenses. Furthermore they are also likely to have less disposable money to spend on monthly groceries and related goods than salary-earners. And unfortunately with rising unemployment, particularly among the youth, many pensioners are having to provide for younger people in their families.


“With the typical private pensioner receiving R4 870 per month, there are probably many private pensioners who can supplement their pensions with old age grants. If it were not for private pensions, the government would have had to find a further R8 billion a year to fund senior citizens of 60 years and older and with no other means of financial income,” ends Schüssler.


BankservAfrica will be releasing a Five-Year Review of Private Pensions in South Africa. Representing the first

time-series on private pensions paid into bank accounts in the world, this review will track private pensions performance (as processed via BankservAfrica’s systems) from January 2013 to the present. 

For an expanded explanation please see the full report.

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"Take-home pay increased marginally by 0.5% in real terms on a year-on-year basis compared to the monthly 1.1% registered for January,”according to Shergeran Naidoo, Head: Stakeholder Engagements at BankservAfrica."

Graph 1: Average private pension as a percentage of Take-home pay

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.