What is Code 4002 on a South African Payslip?
Your provident fund contribution explained — how it reduces PAYE, how it differs from code 4001, and what the two-pot retirement system means for your contributions.
4002Code 4002 is your employee provident fund contribution — deducted from your salary each month and paid into a registered provident fund. It is tax-deductible up to 27.5% of your income (max R430,000/year), meaning it reduces your taxable income and lowers your monthly PAYE immediately.
What Code 4002 Means
Code 4002 sits in the 4000 deduction series on your payslip and IRP5, alongside PAYE (4102), UIF (4101), and pension fund contributions (4001). It records your employee contribution to a registered provident fund — a workplace retirement savings vehicle governed by the Pension Funds Act.
Like pension fund contributions, provident fund contributions are fully tax-deductible under Section 11F of the Income Tax Act. This means your code 4002 amount reduces your taxable income before PAYE is calculated, lowering your monthly tax deduction immediately — you do not wait until year-end to receive the benefit.
The amount shown under code 4002 is your employee contribution only, as specified by your provident fund rules — typically between 5% and 10% of pensionable salary. Your employer's matching contribution is recorded separately as a fringe benefit under code 3817.
Code 4002 vs Code 4001 — Key Differences
Both pension funds (code 4001) and provident funds (code 4002) are retirement savings vehicles and both receive identical tax treatment under Section 11F. The distinction lies in the fund type and its historical benefit structure.
| Feature | Code 4001 — Pension Fund | Code 4002 — Provident Fund |
|---|---|---|
| Tax deductibility | Yes — Section 11F | Yes — Section 11F |
| Annual cap | 27.5% or R430,000 | 27.5% or R430,000 |
| Two-pot system | Applies from Sep 2024 | Applies from Sep 2024 |
| Employer code | 3817 (fringe benefit) | 3817 (fringe benefit) |
| Historical retirement benefit | Two-thirds must be annuity | Full cash withdrawal allowed (pre-reform) |
| Post-reform difference | Retirement component rules now largely aligned under two-pot system | |
All provident fund contributions (code 4002) are now split: two-thirds go to the retirement component (accessible only at retirement or emigration) and one-third to the savings component (accessible once per tax year via a taxable withdrawal, minimum R2,000). This brings provident funds in line with pension funds for new contributions. Pre-September 2024 balances are held in a vested component under the old rules. The full code 4002 contribution remains tax-deductible regardless of the split.
PAYE Saving — How Code 4002 Lowers Your Monthly Tax
The tax benefit of code 4002 works identically to code 4001: the contribution is subtracted from your taxable income before PAYE is calculated, reducing the income on which tax is charged and therefore the monthly PAYE deduction.
| Item | No Provident Fund | With 7.5% Provident (Code 4002) |
|---|---|---|
| Monthly gross salary | R30,000 | R30,000 |
| Provident contribution (code 4002) | — | R2,250 |
| Annual taxable income | R360,000 | R333,000 |
| Annual PAYE | R56,757 | R50,127 |
| Monthly PAYE | R4,730 | R4,177 |
| Monthly PAYE saving | — | R553 |
| Net cost of R2,250 contribution | — | R1,697 |
Use our Provident Fund Calculator to model the long-term growth of your contributions, and the Retirement Annuity Calculator to compare the benefit of supplementing with an RA.
Frequently Asked Questions
What does code 4002 mean on my payslip?
Code 4002 is your employee provident fund contribution — deducted monthly from your salary and paid into a registered provident fund. It is tax-deductible under Section 11F, reducing your taxable income and lowering your monthly PAYE deduction immediately. Only your employee portion appears as 4002; your employer's contribution is recorded separately as a fringe benefit.
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 receive identical tax-deductible treatment under Section 11F with the same annual limits (27.5% or R430,000). The historical difference in how retirement benefits were paid has largely been resolved by the two-pot system introduced in September 2024, which applies the same retirement and savings component structure to both fund types.
Is code 4002 tax-deductible?
Yes. Provident fund contributions are deductible from taxable income under Section 11F, 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 your taxable income before PAYE is calculated, so you receive the benefit through a lower monthly tax deduction — not just at tax return time.
How does the two-pot system affect code 4002?
Since 1 September 2024, provident fund contributions are split: two-thirds to the retirement component (preserved until retirement) and one-third to the savings component (accessible once per tax year, minimum R2,000 withdrawal, taxed at your marginal rate). Pre-September 2024 balances remain in a vested component under the old rules. The full code 4002 contribution remains tax-deductible regardless of this split.
What happens to my code 4002 balance if I resign?
On resignation you can transfer your balance to a preservation provident fund or your new employer's fund without tax. If you take cash, the lump sum is taxed using the SARS retirement withdrawal table — the first R27,500 is tax-free, then graduated rates apply. Early withdrawal permanently forfeits the tax-free growth inside the fund, so preservation is generally recommended.
Can I contribute to both code 4002 and a retirement annuity?
Yes. Contributions to a provident fund (4002), pension fund (4001), and retirement annuity (4003) are all pooled under the same Section 11F deduction limit. The combined total must not exceed 27.5% of the greater of your remuneration or taxable income, or R430,000 per year — whichever is lower. Excess contributions above the limit are carried forward to the following tax year.