Projected pension capital and replacement-ratio income at retirement.
Fund capital at retirement
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Income (4.5% draw)
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Final salary
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Replacement ratio
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What this projection is really measuring
Most people save into a pension fund for thirty years and never see the shape of the curve until they are almost at the finish line. This tool draws that curve in advance. It takes your current fund, adds a contribution every year, grows the whole balance, and lets your salary creep up with escalation, so by retirement you get two numbers that matter: the capital you have built and the income that capital can pay you. The clever part is the second number, because a big fund means nothing until you know what monthly cheque it produces.
The order of operations inside each year
The sequence is deliberate and it changes the answer. In each year the calculator first adds your contribution, then grows the combined balance, then escalates your salary ready for the next round. So the first year's contribution is based on your starting salary, not next year's. Contributions to a pension fund are deductible against your taxable income, up to 27.5 percent of the greater of your remuneration or taxable income and capped at R350,000 a year. That is the rule this tool assumes when it treats your contribution as going in untaxed, and it is worth confirming the cap with SARS because the rand figure is the kind of number that gets adjusted.
A five year run you can follow by hand
The default view runs thirty years and the balance gets large fast, so to see the mechanics clearly take a shorter horizon. Picture someone aged 40 retiring at 45, starting with a R300,000 fund and a R600,000 salary, putting in 15 percent a year, with 9 percent growth and 5 percent salary escalation. Here is exactly what the engine does, year by year, using the rates this calculator applies.
| Year | Salary that year | Contribution (15%) | Fund after growth (9%) |
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After five years the fund reaches roughly R1.1 million. Drawing it at the mid band rate of 4.5 percent gives about R49,724 a year of income, against a final salary of R765,769, a replacement ratio near 6.5 percent. That is tiny because five years is far too short. Run the full thirty years on the defaults and the same engine compounds the fund to about R25.9 million and lands a 45 percent replacement ratio. Time, not contribution size, does most of the heavy lifting.
Turning capital into a monthly cheque
The fund value converts to income using a 4.5 percent drawdown, which sits in the middle of the legal living annuity band of 2.5 percent to 17.5 percent. That 4.5 percent is the tool's own assumption, a sensible mid point, not a tax rate to verify with SARS, the band itself is the regulatory limit set in the living annuity rules. Draw too little and you leave money on the table, draw too much and you risk running the fund dry. A common target replacement ratio is 70 to 75 percent of final salary, since some costs fall away once you stop commuting and saving, so a 45 percent result is a clear signal to lift contributions or push the retirement date out.
Who should run this and the trap to avoid
This is for anyone with a workplace pension fund or retirement annuity who wants a reality check rather than a vague hope. The most common mistake is anchoring on the rand figure at retirement and feeling rich. R25.9 million sounds enormous, but thirty years of 5 percent salary escalation means your final salary is also large, so the ratio is what tells you whether you can actually maintain your lifestyle. A practical tip: nudge the contribution up by two or three percentage points and rerun it, the gap closes faster than most people expect because every extra rand compounds for the full term.
Does the 9 percent growth rate include inflation?
Yes, the growth input is a nominal rate, so it is measured in future rands before inflation is stripped out. Your final fund will look big partly because money is worth less by then. To judge real purchasing power, pair this with an inflation adjustment, and remember the salary escalation already reflects that your living costs are climbing too.
What happens to the income I do not draw?
Inside a living annuity, capital you do not withdraw stays invested and keeps growing, and there is no annual cap on switching the drawdown rate within the band each year. The flip side is longevity risk: the fund is yours and your heirs', but if markets disappoint and you draw heavily, it can deplete. This projection stops at the point of retirement, so use a dedicated drawdown tool to model the decades after.