Take-home beats inflation
GROWTH: HARD-HIT SA WORKERS WILL REALISE EXTRA RAND AT MONTH-END
Positive salary increases for the seventh consecutive month; real pension increased 5%.
The revised personal income tax, which came into effect at the beginning of April, provided some relief for employees earning below R432 300 per year and saw take-home pay increase 1.5% above inflation, while privately banked pensions increased 5%.
Although this revision isn’t the main driver of salary growth, for the first time in two years, the partial tax relief of 3.2% for those earning below R432 300 per year and the adjustment of the primary tax rebate has helped South Africa’s take-home pay increase slightly more than that in 2017.
This year’s personal income tax relief was far more than the 1% in the 2017 tax year and also went slightly further than the 2016 tax relief.
The average take-home salary was R14 681 in nominal terms for last month, a 5.8% increase on April last year.
The BankservAfrica TakeHome Pay in real terms shows the average salary was R13 909, 1.5% higher than a year ago. This is the seventh consecutive month of positive salary increases.
The increases may, however, not remain as strong as the public servants wage negotiations are still taking place.
There are also indications that 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.
The average take-home pay signals retail sales and overall consumer spending should be strong in April. However, the valued-added tax increases may have a dampening impact.
South Africa’s employees have not fared badly when inflation trends lower. Therefore, as inflation is likely to trend upwards for a few quarters, the positive takehome pay increases may slow somewhat.
Pensions remain super strong
BankservAfrica’s Private Pension Index (BPPI), which tracks about 670 000 pensions paid across the banking system, shows that real pension increased by 5%.
In current prices, private pensions increased by 9% on a yearon-year basis. This strong performance is surprising as investment returns have not always been as robust over the last few years.
However, as interest rates are higher than inflation and bond yields, it may be that a more conservative approach to pension investments have paid off. Pensioners are more likely to have a conservative approach to their investments.
In nominal terms, the average pension increased to R7 096 last month. 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 April. Tax relief also probably added a percentage or two to the increase as the 3.2% tax relief was certain also aimed at income level at which 99% of pensioners get their pensions.
Average private pensions pay was 49.8% of the average takehome salary. – BankservAfrica