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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

UFS law experts publish unique translation
2006-06-21

Attending the launch of the publication were from the left:  Prof Boelie Wessels (senior lecturer at the UFS Faculty of Law), Prof Frederick Fourie (Rector and Vice-Chancellor of the UFS), Prof Johan Henning (Dean: UFS Faculty of Law) and Adv Jaco de Bruin (senior lecturer at the UFS Faculty of Law). Prof Wessels translated the treatise from corrupted medieval lawyer Latin into English, Prof Henning is the leading author and initiator of the publication and Adv de Bruin assisted with the proofreading and editing. Photo: Stephen Collett

UFS law experts publish unique translation of neglected source of partnership law

The Centre for Business Law at the University of the Free State (UFS) has translated a unique long neglected Roman-Dutch source of the law of partnership law from Latin into English.  This source dates back to 1666. 

The book, called Tractatus de Societate (A Treatise on the Law of Partnership), by Felicius and Boxelius is published as Volume 40 in the research series Mededelings van die Sentrum vir Ondernemingsreg/Transactions of the Centre for Business Law.  It is the first translation of this Roman-Dutch source into English and comprises of a comprehensive discussion of the South African common law of partnerships.  

“Apart from various brief provisions dealing on a peace meal and an ad hoc basis with diverse matters such as insolvency, there is no comprehensive Partnership Act in South Africa.  The law of partnership in South Africa consists of South African common-law, which is mainly derived from Roman-Dutch law,” said Prof Johan Henning, Dean of the Faculty of Law at the UFS.  Prof Henning is also the leading author and initiator of this comprehensive publication.

“Countries such as America, England, Ireland and The Netherlands have drafted or are in the process of establishing new modern partnership laws in line with new international guidelines, practices and commercial usages,” said Prof Henning.

“However, in South Africa the most recent policy document released by the Department of Trade and Industry explicitly excludes partnership law from its present company law reform programme and clearly regards this as an issue for another day,” said Prof Henning.

“Unless there is a political will to allocate the necessary resources to a comprehensive partnership law revision program, it is a practical reality that South Africa will not have a modern Partnership Act in the foreseeable future,” said Prof Henning. 

According to Prof Henning South African courts have been using the Roman-Dutch partnership law sources as authority.  “The English Partnership Act of 1890 is not binding and the English text books should therefore be approached with caution,” said Prof Henning.

“A treatise on the law of partnership that has been regarded by South African courts as an important common law authority is that of  a Frenchman by the name of Pothier.  This treatise was translated into English and was regarded as an au­thority of significance in The Netherlands towards the end of the eighteenth century,” said Prof Henning. 

“Pothier’s opinions are however not valid throughout in the Roman-Dutch partnership law as it did not apply to the Dutch province of The Netherlands and it sometimes also rely on local French customs for authority,” said Prof Henning.

For this reason the Centre for Business Law at the UFS decided to focus its attention again on the significance of the comprehensive treatise of Felicius and Boxelius on the Roman-Dutch partnership law.  Felicius was an Italian lawyer and Boxelius a Dutch lawyer.

This long neglected source of partnership law was published in 1666 in Gorkum in The Netherlands.  "A significant amount of Roman-Dutch sources of authoritive writers trusted this treatise and referred to it,” said Prof Henning.

The translation of the treatise from corrupted medieval lawyer Latin into English  was done by Prof Boelie Wessels, a very well-known expert on Roman Law and senior lecturer at the UFS Faculty of Law.  Prof Wessels, who  has 15 degrees, spent almost ten years translating the treatise.  The proofreading and editing of the translation was done by Prof Henning and Adv Jaco de Bruin, a senior lecturer at the UFS Faculty of Law.

“We want the South African courts to use Volume 40 in the research series Mededelings van die Sentrum vir Ondernemingsreg/Transactions of the Centre for Business Law as the primary source of reference when cases where Roman-Dutch Law partnership law principles are involved, are ruled on,” said Prof Henning.

The first part of the publication comprises of selected perspectives on the historical significance of the work as well as a translation of selected passages. “The intention is to follow this up expeditiously with the publication of a very limited edition of a complete translation of the work,” said Prof Henning.

A total of 400 copies of the publication will be distributed to all courts, the Appeal Court and the Supreme Court.

Media release
Issued by: Lacea Loader
Media Representative
Tel:   (051) 401-2584
Cell:  083 645 2454
E-mail:  loaderl.stg@mail.uovs.ac.za
21 June 2006

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