A fund, in the payroll sense, is a registered retirement or benefit vehicle into which contributions are paid and from which a member draws a future benefit. Pension, provident and retirement annuity funds are the main types.
What it means
Contributions to a fund get specific tax treatment, which is why funds matter to payroll rather than just to the employee. The employee's contribution can reduce the PAYE base up to the Section 11F cap, and an employer's contribution is a taxable fringe benefit. The type of fund and its rules determine the contribution base and how the eventual benefit is taxed.
Where it fits in
Payroll calculates the employee and employer contributions to each fund every period off the pensionable earnings the fund defines, deducts the employee share, and pays both shares across. The amounts are reported on the IRP5 under fund-specific source codes.
Key rules
- A pooled vehicle holding contributions for a future benefit.
- Pension, provident and retirement annuity are the principal fund types.
- Employee contributions reduce the PAYE base up to the Section 11F cap.
- Employer contributions are taxable fringe benefits to the member.
