What is Code 4001 on a South African Payslip?
Your pension fund contribution explained — how it reduces your PAYE, what the deduction limit is, and how the two-pot retirement system affects it.
4001Code 4001 is your employee pension fund contribution — deducted from your gross salary each month and paid into a registered pension fund. It is tax-deductible up to 27.5% of your income (max R430,000/year), which means it reduces your taxable income and lowers your monthly PAYE immediately.
Retirement Contribution Deduction Limits — 2026/2027 (Section 11F)
| Code | Description | Who contributes | Deduction pool |
|---|---|---|---|
| 4001 | Pension fund | Employee | Shared 27.5% limit, max R430,000/year |
| 4002 | Provident fund | Employee | Shared 27.5% limit, max R430,000/year |
| 4003 | Retirement annuity (RA) | Individual / employee | Shared 27.5% limit, max R430,000/year |
| 3817 | Pension fund (employer portion) | Employer | Reduces employee PAYE — not a separate Section 11F limit |
All three employee codes (4001, 4002, 4003) draw from the same R430,000 annual deduction pool. Contributing to more than one fund does not increase the cap.
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What Code 4001 Means
Code 4001 sits in the 4000 deduction series on your payslip and IRP5, alongside PAYE (4102) and UIF (4101). Unlike those deductions, pension fund contributions are tax-deductible — they reduce the income on which PAYE is calculated before any tax is deducted. This makes code 4001 one of the most tax-efficient entries on your payslip.
The amount shown under code 4001 is your employee contribution only, as specified by your pension fund rules — typically between 5% and 10% of your pensionable salary. Your employer usually also contributes to the fund on your behalf, but that portion is recorded separately as a fringe benefit under code 3817 and does not appear in your code 4001 figure.
The deductibility of pension contributions is governed by Section 11F of the Income Tax Act. The maximum allowable deduction is 27.5% of the greater of your remuneration or taxable income for the year, capped at R430,000 per annum for the 2026/2027 tax year. Most employees earning below R1.56 million per year are constrained by the 27.5% percentage limit before reaching the rand cap.
All pension fund contributions (code 4001) are now split under the two-pot system. Two-thirds of new contributions go to the retirement component (accessible only at retirement or emigration) and one-third goes to the savings component (accessible once per tax year via a taxable savings withdrawal). The tax deductibility of your full code 4001 contribution is unchanged — the entire amount still reduces your taxable income.
How Code 4001 Reduces Your PAYE — Worked Example
Here is a side-by-side comparison for an employee earning R30,000 gross per month contributing 7.5% to a pension fund (R2,250/month) versus an employee with no pension contribution, in the 2026/2027 tax year.
| Item | No Pension | With 7.5% Pension (Code 4001) |
|---|---|---|
| Monthly gross salary | R30,000 | R30,000 |
| Pension contribution (code 4001) | — | R2,250 |
| Annual taxable income | R360,000 | R333,000 |
| Annual PAYE before rebate | R73,992 | R66,972 |
| Less: Primary rebate | − R17,820 | − R17,820 |
| Annual PAYE | R56,172 | R49,152 |
| Monthly PAYE (÷ 12) | R4,681 | R4,096 |
| Monthly PAYE saving from pension | — | R585 |
| Net cost of R2,250 pension contribution | — | R1,665 |
| Monthly take-home pay | R25,142 | R23,477 + R2,250 saved |
The pension contribution of R2,250 reduces take-home pay by only R1,665 after the PAYE saving — meaning R585 of the contribution is effectively funded by a reduction in tax. The remaining R2,250 builds your retirement benefit, not just the R1,665 net cost.
Use our Provident Fund Calculator and Retirement Annuity Calculator to model the long-term growth of your contributions.
Frequently Asked Questions
What does code 4001 mean on my payslip?
Code 4001 is your employee pension fund contribution — the amount deducted each month and paid into a registered pension fund. It is tax-deductible, meaning it reduces your taxable income before PAYE is calculated, resulting in a lower monthly tax deduction and higher take-home pay compared to earning the same salary without a pension contribution.
Is code 4001 tax-deductible?
Yes. Under Section 11F of the Income Tax Act, pension contributions are deductible up to 27.5% of the greater of your remuneration or taxable income, capped at R430,000 per year for 2026/2027. The deduction reduces the income on which PAYE is calculated — so you benefit immediately each month through a lower PAYE deduction, not just at tax return time.
What is the difference between code 4001 and code 4002?
Code 4001 is for pension fund contributions and code 4002 is for provident fund contributions. Both are tax-deductible under the same Section 11F limits. The historical distinction was in how benefits were paid at retirement, but since the two-pot retirement system launched in September 2024, both fund types operate under the same savings/retirement component split and the differences have narrowed considerably.
How much pension contribution shows as code 4001?
Code 4001 shows your actual monthly employee contribution as specified in your fund rules — typically 5% to 10% of pensionable salary. Your employer's matching contribution is not included in code 4001; it appears as a fringe benefit under code 3817 on your IRP5. Check your fund rules or ask your HR department for your specific contribution rate.
How does the two-pot system affect code 4001?
Since 1 September 2024, your code 4001 contributions are split: two-thirds go to the retirement component (preserved until retirement) and one-third goes to the savings component (which you can access once per tax year, subject to tax and a minimum withdrawal of R2,000). The full contribution still reduces your taxable income — the tax deductibility is unchanged.
What happens to my code 4001 contributions if I resign?
On resignation, you can transfer your pension benefit to a preservation fund or your new employer's fund without paying tax. If you cash out, the withdrawal is taxed at the SARS retirement lump sum rate — the first R27,500 is tax-free, then graduated rates apply. Early withdrawal also permanently loses the tax-free growth and compounding inside the fund, so most financial advisors recommend preserving the benefit.
What is the pension fund tax deduction limit in South Africa for 2026/2027?
For 2026/2027, pension fund contributions (code 4001) are deductible from taxable income up to 27.5% of the greater of your gross remuneration or taxable income, capped at R430,000 per year. This limit is shared across all retirement contributions — pension fund (4001), provident fund (4002) and retirement annuity (4003) contributions all draw from the same pool. Contributing to multiple funds does not increase the R430,000 cap. The deduction reduces your taxable income immediately through your employer’s payroll, lowering your monthly PAYE.