Projected provident fund balance from employee and employer contributions.
Projected balance at retirement
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Monthly contribution
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Total contributed
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Your breakdown
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Item
Amount
Worked example
Take a R35,000 monthly salary with the employee and employer each putting in 7.5 percent, an opening balance of R150,000, 25 years to retirement and growth of 9 percent a year. The combined contribution is 15 percent of R35,000, which is R5,250 a month. Over 25 years that is R1,725,000 of contributions on top of the starting balance. With monthly compounding at 9 percent, the R150,000 grows to about R1,411,262 and the stream of contributions grows to about R5,885,890, for a projected balance of roughly R7,297,152. Annual contributions here are R63,000, well under the R350,000 deduction cap, so the full amount is tax-deductible. The headline lesson is that growth, not the contributions themselves, drives most of the final pot over a long horizon.
Step
Amount
Monthly contribution (15% of pay)
R5,250
Total contributed (with R150k start)
R1,725,000
Growth from compounding
R5,572,152
Projected balance at retirement
R7,297,152
How it is calculated
The projection combines two future values. The opening balance is grown forward at the monthly growth rate for the full number of months. The monthly contributions, your share plus the employer share, are grown as an ordinary annuity over the same period. Adding the two gives the projected balance at retirement. Total contributed is the opening balance plus every monthly deposit, and growth is the balance less that figure. Since March 2016, provident fund contributions are deductible on the same basis as pension and retirement-annuity contributions, up to 27.5 percent of the greater of remuneration or taxable income, capped at R350,000 a year, and the employer contribution counts toward that cap as a fringe benefit. Growth inside the fund is untaxed until you draw it, and at retirement the lump-sum and income rules then apply, so this is a pre-tax projection of the pot, not of what lands in your pocket.
Frequently asked questions
Are provident fund contributions tax-deductible?
Yes. Since March 2016 provident fund contributions are treated like pension and retirement-annuity contributions and are deductible up to 27.5% of the greater of remuneration or taxable income, capped at R350,000 a year. Both your contributions and the employer fringe-benefit contributions count toward that cap. Growth in the fund is tax-free until you draw it.
What is the difference between a provident fund and a pension fund in South Africa?
Historically the key difference was how you could take the money at retirement: a pension fund required you to buy an annuity with at least two-thirds of the pot, while a provident fund allowed a full lump-sum withdrawal. Since March 2021 the annuitisation rules were aligned for new contributions, so both funds now require you to use two-thirds for an annuity on post-2021 contributions. Existing provident fund balances and the returns on them remain subject to the old rules for members who were 55 or older on 1 March 2021.
How does the two-pot retirement system affect a provident fund?
From 1 September 2024 all retirement fund contributions are split: one-third goes into an accessible savings component that you can withdraw from once per tax year, and two-thirds go into a preserved retirement component that can only be accessed at retirement. The minimum savings component withdrawal is R2,000 and it is taxed at your marginal income tax rate, not the withdrawal table. The two-pot reform applies to provident, pension and retirement-annuity funds alike.
What happens to my provident fund if I change jobs?
On leaving a job you can transfer the fund balance directly to your new employer's fund or to a preservation fund with no tax consequence, which keeps compounding tax-free until retirement. If you cash it out instead, the withdrawal benefits table applies: only the first R27,500 is tax-free and the rest is taxed at 18%, 27% or 36% depending on the amount, with any prior withdrawals aggregated to push you into a higher band. Preserving is almost always the better financial outcome.