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07 August 2024 Photo Supplied
Dr Cecile Duvenhage
Dr Cecile Duvenhage is a lecturer in Personal Finance and Microeconomics, Department of Economics and Finance, University of the Free State (UFS), and the Editor and Co-Author: Personal Finance (Van Schaik Publishers).

Opinion article by Dr Cecile Duvenhage, Lecturer: Personal Finance and Microeconomics, Department of Economics and Finance, University of the Free State, Editor and Co-Author: Personal Finance (Van Schaik Publishers).


On 29 July 2022, the National Treasury released the 2022 Draft Revenue Laws Amendment Bill for public comment until 29 August 2022 to introduce the “two-pot” system for retirement savings that was flagged in the National Budget. The Revenue Laws Amendment Act was the first law approved by Parliament in 2023 and signed into law, giving effect to the new system and setting the implementation date. The Pension Funds Amendment Bill was approved by Parliament in May 2024. It introduces changes to the Pension Funds Act and includes funds not regulated by the Pension Funds Act in the new system. President Cyril Ramaphosa officially signed the Pension Funds Amendment Bill into law on July 21, 2024

The two-pot retirement system in South Africa (to be implemented on 1 September 2024) divides retirement savings into two distinct components: 1) the savings and 2) the retirement pot:

1) Savings Pot: About one-third of the contributions go into this pot that is designed for short-term financial goals and emergencies. Members will be able to access a portion of these savings before retirement if necessary, and can withdraw from it once a year (minimum withdrawal amount of R2 000) under specific conditions. 

However, according to the Citizen (22 July 2024) 30% of pension fund members in the Old Mutual Stable fund will have less than R2 000 in their savings pot and will not be able to claim. Informal sector workers often lack coverage, and traditional family-based care for the elderly is breaking down as urbanisation increases. Therefore, this system seems to benefit the middle-income group and (again) fail the poorest of the poor.

Keep in mind that access to the savings pot’s money has implications on both the tax that the individual pays and legal requirements during divorce proceedings. More specifically:

• Withdrawals are subject to taxation at the individual’s marginal tax rate
• Retirement fund administrators must be notified when divorce proceedings are initiated to ensure that no payments are made from the savings pot during the legal process. This ensures that the division of assets is handled correctly according to the legal requirements.

2) Retirement Pot: The retirement component ensures that the bulk of retirement savings – two-thirds – remain untouched until retirement age as stipulated by the fund. This preservation is crucial for securing long-term financial stability post-career. These funds are strictly preserved until retirement age, ensuring long-term financial security. Upon retirement, members can access these funds as a regular income stream, like a pension annuity.

Is it wise to take a portion of your pension?

There are also two sides to the Pension Funds Amendment Bill. Individuals and Financial Companies welcome this new law, as it allows the Financial Sector Conduct Authority (FSCA) to start approving rule amendments – submitted by various funds before 31 July 2024 – once gazetted.

Discovery was the fund to react the quickest with its proposed amendment rules. Some of the other retirement funds and administrators still have a substantial amount of work to do before they will be able to pay claims, including ensuring administration readiness and integration with SARS. SARS anticipates a R5 billion revenue windfall from taxing two-pot retirement system withdrawals in the next financial year. Thus, the government expects many hundreds of thousands of South Africans to access the savings component of their retirement funds as soon as the two-pot retirement system goes live.

Making use of the government’s lifeline – to protect the dignity of those in need and overcome financial stress – can be understood given the economic constraints facing individuals such as high unemployment, excessive debt, and inflation.

However, a wiser approach by the government should be to address the consequences and not the causes of citizens’ financial dignity. Given that less than 6% of individuals in South Africa can retire “without worries”, individuals should also have a good understanding that this “lifeline” is no quick fix for financial stress.

Hidden costs and other implications

Members of South African pension funds may generally access their pension pot from the age of 55. If you withdraw before the age of 55, there will be tax implications. This means that the withdrawal will be taxed similarly to your salary or other income. Any withdrawal is included in your gross income for the year, potentially pushing you into a higher tax bracket.

There will also be hidden costs in the form of penalties as stipulated by the member’s fund. The Institute of Retirement Funds Southern Africa has indicated an administration fee ranging from R300 to R600 on each withdrawal.

South Africa has a progressive tax system, where tax rates increase as taxable income rises. It is designed to be fairer by imposing a lower tax rate on low-income earners and a higher rate on those with higher incomes. Therefore, the amount that a member will get out depends on his/her marginal rate. Should a member be paying 45% tax on his/her taxable income (when earning more than R512 801 per year), a member might end up only getting slightly more than half of the withdrawal amount – once your tax-free benefit at retirement is exhausted.

Some further long-term benefits can be jeopardised when a member withdraws from the retirement savings. These are:

1) Tax-Free Benefit at Retirement: Keep in mind that withdrawals may reduce the tax-free benefit you enjoy at retirement. Up to R550 000 of the lump sum you take in cash at retirement may be tax-free, but this benefit can be eroded if you frequently withdraw from your savings pot before retirement.

2) Lost Tax-Free Growth: Additionally, withdrawing from your savings pot means losing out on tax-free growth. Savings in your retirement fund grow free of tax on interest income, dividends, and capital gains.

Apart from the tax implications, some pension providers will charge fees for withdrawals. Therefore, it is advisable to check with your pension administrator to understand any costs involved. In addition, withdrawing from your savings pot will reduce the remaining balance.

Early withdrawals can significantly affect your retirement savings. Every R1 withdrawn at age 35 could equate to as much as R30 less at retirement 30 years later.

“Two pots” may spoil the broth

Statistics from the Nedfin Health Monitor (2023) reveal that 90% of South Africans have inadequate savings for retirement, and a significant 67% of people in the country have no retirement savings beyond what they are putting into their employer-provided pension funds – which is often too little to be able to retire comfortably. The general rule of thumb is that individuals start saving as soon as possible, as much as possible, for as long as possible.

There is a saying that “too many cooks spoil the broth”. My personal view is that individuals need to be careful that “two pots” do not spoil the broth.

Although the system aims to balance immediate financial needs with long-term security, there is simply no way that individuals can eat their cake and have it. If the two-pot system is regarded as a bailing-out system, worry-free retirement remains a challenge for many. There is still a lot of thought needed for the two-pot system. Policymakers should consult the pension systems of the Netherlands, Iceland, Denmark, and Israel – which are regarded as having the best pension systems globally – to get an understanding of how adequacy, sustainability, and integrity are prioritised.

News Archive

Centenary medals awarded
2004-10-15

Speech, Rector and Vice-Chancellor: Prof. Frederick Fourie

Op 28 Januarie 2004 het ons die honderdste herdenking van die geboorte van hier­die hoër onderwys instelling gevier met ‘n groot partytjie voor die Hoofgebou. Dit was ‘n wonderlike en vreugdevolle aand.

Die historiese prosessie tydens die amptelike opening van 6 Februarie 2004, in kleurvolle akademiese togas, vanaf ons wortels in Grey-Kollege tot by die Hoof­gebou, het die reistog vanaf die verlede na die hede treffend ge­simbo­liseer.

Talle ander eeufeesgeleenthede het gedurende hierdie jaar plaasgevind. Woensdagaand het ons die premiêre van ‘n dokumentêre film oor koning Moshoeshoe beleef – ‘n belangrike eeufeesprojek van die UV wat onder meer gemik is op die ontwikkeling van ‘ n gedeede geskiedenisbesef – a shared sense of history – and the celebration of a very special leadership, of a spirit of nation-building and reconciliation, in somebody like king Moshoeshoe (also MT Steyn and others…)

Last night we experienced a wonderful and moving honorary doctorary ceremony, with a wonderful group of South Africans like Khotso Mokhele, Antjie Krog, Jakes Gerwel, Van Zyl Slabbert, Jaap Steyn, Saleem Badat, and others - giving so much food for thought.

This evening, where we honour outstanding contributors to the development of this University, is a suitable moment to reflect on the course of the first 100 years of the University of the Free State.

1. ‘n Voëlvlug oor die geskiedenis: die vyf fases

1.1 Eerste fase: 1904 – 1927 (Eerste kwarteeu)

Eerste wankelende treë in die totstandkoming van die
Grey Universiteitskollege

Gedurende 1904 – 1920 word die eerste en mees basiese vakke in geestes- en natuurweten­skappe ingestel, eerste Senaat en eerste Raad saamgestel, en eerste geboue opgerig (hoofgebou en manskoshuis). Teen 1920 was daar egter slegs ongeveer 100 studente, die instelling was finansieel in die knyp, met geen vooruitgang en groei, en ook nie ‘n vaste rektor nie – klaar­blyk­lik was die GUK nog geen lewensvatbare instelling nie. Vrystaatse kinders word steeds eerder na ander universiteite gestuur.

Hierna maak ds JD Kestell, rektor 1920 – 1927, ‘n reuse bydrae om ‘n versukkelde, arm, klein universiteitskollege lewensvatbaat te kry. Hy slaag met fonds­insameling en oortuig Afrikaanse én Engelse ouers om hulle kinders na die GUK te stuur. Teen 1927, met 420 studente, word die eerste nederige mylpale van kritiese massa bereik te midde van ‘n steeds armoedige Vrystaat­se gemeenskap en ‘n studentekorps met gelapte klere. [Maar ook die tyd waarin die Reitz-saal, waarin hierdie plegtigheid plaasvind, gebou is.]

1.2 Second phase: 1927 – 1950 (Tweede kwarteeu)

The Grey University College becomes a fully fledged university

By 1950 the establishment of main basic and career-oriented faculties were completed – Faculty of Commerce in 1937; Faculty of Law as wel as the Faculty of Education in 1945. Student numbers reached 1000 in 1950.

Die UKOVS beleef en oorleef die Groot Depressie, die armblankevraagstuk, die Tweede Wêreldoorlog, taal- en politieke stryd onder Afrikaners, en die stryd van Nat vs Sap, ook op die kampus. Die tydperk word veral gestempel deur die taalstryd met DF Malherbe (rektor 1929 – 1934) as sterk kampvegter vir Afrikaans. Veral na 1948 volg rektor Van der Merwe Scholtz ‘n doelbewuste enkel­talige Afrikaanse rigting (Christelik-nasionaal).

1.3 Derde fase: 1950 – 1976 (Derde kwarteeu)

Ongekompliseerde groei ná onafhanklikheid

Hierdie periode word gestempel deur verkryging van onafhanklikheid as universiteit op 18 Maart 1950. Daarna beleef die UOVS onder rektore Scholtz, Flippie Groene­woud en Benedictus Kok stelselmatige groei sonder beduidende finansiële kommer. Die UV is duidelik ‘n Afrikaanse ‘volksuniversiteit’ op Christelik-nasionale grondslag, onlosmaaklik in­gebed in die dominante politieke bedeling van apartheid en afsonder­like ontwikke­ling. Dit is die hooggety van Afrikaner (en blanke) self­vertroue en heerskappy. Vir personeel sowel as studente is dit ‘n relatief onge­kom­­pliseerde tyd getipeer deur groeiende voor­spoed in die blanke en Afrikaanse gemeenskap, goeie werksvooruitsigte vir studente, kommer­lose studentepret, en min spanning op die kampus.

The academic focus is on teaching, especially to provide staff for the growing public service and education sectors. Research has a low profile. More career-oriented or professional faculties are established: agriculture in 1958 and the medical faculty in 1970. Student numbers reach 2000 in 1960, 4000 in 1970 en 7000 in 1975. Many new residences and academic buildings are erected, especially in the Kok-era.

Teen 1976 was die vernaamste boustene van ‘n medium-grootte universiteit in posisie: onafhanklikheid, genoeg fakulteite, genoeg koshuise en akademiese geboue, goeie sport en kultuur. Op die oog af is die ideaal van volwaardige, onaf­hanklike universiteit verwesenlik.

1.4 Vierde fase: 1976 – 1989

Op koers na die jaar 2000: van die statiese na vernuwing

Politieke onstabiliteit en oorgang in die land begin met die Soweto-onluste, die drie-kamer parlement, PW Botha se Rubicon-toespraak, noodtoestande, die ‘struggle’ en opkoms van UDF, en so meer. Die UOVS is swaar onder die indruk van die ‘totale aanslag’ en die regering se totale teen-strategie. Die Universiteit word polities en akade­mies geïsoleer en intellektueel gemarginaliseer. Ekonomies is dit moeiliker tye na die oliekrisis en die begin van hoë inflasie, en die Staat se finansies wat begin knyp.

Academically this period is distinguished by the strong stimulation and support of the research capacity and orientation by rector Wynand Mouton, which leads to a significant growth in research, especially in the natural sciences. The faculty of Theology is establishyed, the Sasol-UFS library erected. Student numbers continue to grow, but at a much slower rate then before.

Twee ander fasette kenmerk hierdie tydperk: eerstens die toelating van die eerste swart studente (nagraadse 1978, voorgraads 1988) en die begin van die era van multikulturaliteit; tweedens, die begin van subsidie- en finansiële probleme en die eerste rasionalisasie van personeel. Albei hierdie is voortekens van ingewikkelde jare wat sou volg vanaf 1990.

1.5 Fifth phase: 1990 – 2004: The turn of the century brings winds of change

(a) 1990 – 1996:

Die Francois Retief era word gedomineer deur die gevolge van die politieke verande­ringe deur president FW de Klerk en die vrylating van Nelson Mandela. Die UV ontwaak tot die realiteit van die oorgang na ‘n post-apartheid samelewing en komende ANC regering. Die eerste versigtige trans­for­ma­sie­stappe word ingestel, multikulturaliteit word die groot uitdaging, en die eerste fasiliterende strukture (bv. die Multikulturele Komitee) word gevestig. Die eerste senior swart personeel word aangestel.

The dramatic decision about the introduction of parallel-medium teaching in 1993 signals the start of multilingualism as well as a significant growth in the admission of black students. Total student numbers are stable at approximately 9000, but black student numbers grow to 36% in 1995. Initially the change to parallel-medium impact negatively on staff teaching load and hence onresearch outputs.

Die inkrimping in staatsubsidie lei tot ernstige finansiële probleme, besparings­pogings, grootskaalse rasionalisasie van personeel in veral die fakulteit Lettere en Wysbegeerte, spanning tussen Senaat en rektoraat oor finansies – en mismoedig­heid onder personeel.

(b) 1997 – 2004:

The time of rector Stef Coetzee and his successor is the era of the new democracy and transformation. At the beginning of this phase Afrikaans parents start sending their children to other Afrikaans universities; residence become half full. Tensions arise between student groups. This is followed by the large breakthroughs in student transformation in 1997, which normalises the situation. The University becomes a leader in transformation. This leads to the acceptance of the multicultural and multilingual character, on a Christian foundation, of the University. The name changes to the University of the Free State (UFS).

Met ‘n finansiële krisis en verdere rasionalisasie van personeel op hande word die akade­miese en finansiële ‘draaistrategie’ in Januarie 2000 geloods. ‘n Drama­tiese finansiële ommekeer lei tot herinvestering in kampus­fasiliteite en toerusting, ‘n toename in personeel en beduidende verhoging in vergoeding bokant inflasie. Terselfdertyd is daar ‘n opbloei in die akademie: innoverende onderrig­programme, e-leer, ‘n fokus op programgehalte. Konsolidering van fakulteite vind plaas, die Bestuurskool word gestig, daar is sterk internasio­na­lisering en groei in navorsing. Profes­sionele bemarking en strategiese kommunikasie verander die beeld van die UV.

Studentegetalle groei dramaties van 10 000 in 2000 na meer as
23 000 in 2003/4; groei moet nou beperk word. Afrikaanse studente keer terug; koshuise kry lang waglyste. Die verhou­ding tussen wit en swart studente op die hoofkampus is rondom 50:50.

The period ends with the incorporation of the Qwaqwa en Vista Bloemfontein campuses, the approval of a new language policy which also established multilingualism in management and administration, and purposeful efforts to consolidate the foundations of an institutional culture of multiculturalism, multilingualism, non-racialism and non-sexism – a culture of tolerance, embracement and justice in diversity. The Centenary is celebrated with harmony and prosperity on the campus in 2004 (although always with a good sprinkling of unexpected challenges and problems).

2. Vanaand bring ons hulde, en sê ons dankie aan, die bouers van die UV

Oor ‘n honderd jaar het honderde, duisende mense ‘n bydrae gelewer tot die UV se ontwikkeling.

Kom ons eer en dank diegene wat, 100 jaar gelede in a baie arm gemeen­skap wat bykans verwoes is deur die Anglo-Boere oorlog, nooit opgehou droom het oor ‘n eie universiteit om die jongmense te dien, om die mense te dien – die arm Vrystaatse mense van daardie tyd.

Let us honour and thank all those who painstaking built this university from very humble beginnings, from the first fragments and embrio of a university – through a hundred years of various wars, of the struggle, of poverty, of bad times but also good times.

In elke dekade, in elke een van die honderd jaar, is hierdie instelling gebou deur die harde werk, idealisme en verbintenis (“commitment”) van leiers, akademiese personeel, steundiens­personeel, dienswerkers. Laat ons hulle eer en dank.

Let us honour the spirit of commitment and ‘vasbyt’, of ‘never let go’, the determination to overcome obstacles, of timely and pre-emptive adjustment to new challenges and new needs, which made that possible.

Kom ons vier en eer die duisende studente wat in die 100 jaar hier was, wat die spesiale tradisies en spesiale gees geskep het van Kovsiekampus, van Kovsie studentelewe – en wat gedurig nuwe tradisies en gebruike geskep (en gepleeg) het, soos net studente dit kan doen.

Let us celebrate the way this University has, in the last 20 years, once again taken up the challenge of transformation and adjusting to new needs, serving all the people, especially those most in need at this time of our history – thereby closing the circle, going fully “from post Anglo-Boer War to Post-Apartheid”.

Kom ons vier, en wees innig dankbaar vir, die wyse waarop hierdie Universiteit in die laaste 5 jaar gedraai het, finansieel sowel as akademies, en die wonderlike periode van akademiese groei en ontwikkeling en verdieping waarin ons nou staan – tesame met die geleenthede wat QwaQwa en Vista Bfn vir ons bied. Hierdie voorspoed sien ons in die nuwe fisiese aangesig van die kampus, insluitend hierdie wonderlike Eeufeeskompleks.

Let us thank God, the Almighty, who has guided this university through a tumultuous century, for always being there for us, for blessing us in so many ways. In Deo Sapientiae Lux

* * *

So: vanaand is ons hier om erkenning te gee en dankie te sê…

Soveel mense het veel vroeër hul fondament-leggende bydraes gelewer, en alles wat ons vandag hier sien, moontlik gemaak. Selfs mense uit meer onlangse jare is reeds oorlede – enkeles terwyl hulle nog in diens van die UV was, ander na hul aftrede.

‘n Bepaalde groep was bevoorreg en geseend om in die laaste ongeveer 30 jaar by die UV betrokke te kon wees, én om vandag nog in die lewe te wees. Dit is van hulle wat vanaand hier is, en wat vanaand Eeufeesmedaljes ontvang.

Geweldige moeite is gedoen om hierdie proses van seleksie en keuring so billik en deeglik as moontlik te doen. Uiteraard is so ‘n proses nie volmaak nie en sal almal nie saamstem met die uitkomste van die proses nie. Groot moeite is egter gedoen in hierdie fase om mense nie verkeerdelik uit te laat uit of in te sluit in die toekenningslys nie, in volle bewustheid dat daar waarskynlik steeds foute gemaak sal word. Onvermydelik sal daar foute wees, of mense wat uitgelaat is. Ons vra daarvoor nederig om verskoning en begrip.

Billikheid, so ‘n belangrike rigsnoer vir hierdie Universiteit, veral in hierdie tye, lei ons ook dat ons oë oop is vir die bydraes vir mense uit alle afdelings van die Universiteit, wat lei tot ‘n bepaalde balans tussen fakulteite, tussen fakulteite en steundienste, tussen poskategorieë, tussen geslag en ras, en individue soveel as mense in spanverband.

In Deo Sapientiae Lux

God bless this university / Modimo o thlonolofatse yunivesithi ena

Khotso Pula Nala

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