BPPI Index

23 May 2018 

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


latest 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 full details refer to the report.

The BankservAfrica Private Pensions Index (BPPI) for April also showed a 5% growth for privately banked pensions.

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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:

Africa’s largest automated payments clearing house, BankservAfrica, launched its BankservAfrica Private Pension Index (BPPI), the first private pension data series in South Africa and one of the few available in the world today. The index provides an income gauge of monthly private pension payments paid into bank accounts of those 60 years of age and over – the fastest growing age group in the country.

Although the majority of people over 60 years of age receive government grants, it can be concluded that by value the largest amount of income in this group would be from private pensions.

“Despite having the sixth highest pension assets to GDP ratio in the world in 2012, very little is currently known about how much South African private pensioners get paid in monthly income,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.