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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

You touch a woman, you strike a rock
2004-11-02

Prof. Engela Pretorius van die Departement Sosiologie in die Fakulteit Geesteswetenskappe by die Universiteit van die Vrystaat het die kwessie omtrent feminisme aangespreek tydens haar intreerede met die onderwerp, You touch a woman, you strike a rock: Feminism(s) and emancipation in South Africa .

Prof. Pretorius het gesê: “Die geskiedenis van feminisme oor die algemeen kan in drie fases verdeel word, waarna verwys word as golwe. Eerste-golf-feminisme (19de eeu) het die fokus geplaas op die beskerming van vroueregte in die openbare terrein, spesifiek die reg om te stem, die reg tot onderrig en die reg om middelklas beroepe en professies te betreë.

Vroeë tweede-golf-feminisme word onthou vir hoe dit moederskap geteoretiseer het as synde ‘n onderdrukkende instelling. Slagspreuke van die 1970s was die persoonlike is polities en susterskap is magtig. Prof. Pretorius sê beide slagspreuke bevestig die idee dat vroue universeel onderdruk en uitgebuit word en slegs deur erkenning van dié situasie kan vroue die strukture wat hul onderdruk verander.

‘n Belangrike aspek van die derde golf van die feminisme-teorie is post-moderne feminisme wat diversiteit en verskille onderstreep. Die poging van hierdie feministe is afgestem op alle vorme van onderdrukking. Vroue van kleur het ook hul ontevredenheid uitgespreek gedurende die derde-golf-feminisme. Die feminisme van vroue van kleur word gekenmerk deur verskeie kwessies en talryke intellektuele standpuntinnames wat neerslaga vind in verskillende terme, soos Afrika feminisme of ‘womanism, sê prof. Pretorius.

Afrika-feminisme dui protes aan teen die wit/westerse geskiedenis en die wit/westerse dominansie binne feminisme. Afrika-vroue het besef dat hul onderdrukking verskillend is van dié van wit vroue en daarom is ‘n ander proses van bevryding nodig. Die Westerse feministiese praktyk om swart vroue by die bestaande feministiese ontologie te voeg, is nie voldoende nie omdat hul unieke ondervindings van slawerny, kolonialisme, onderdrukking deur mans en armoede nie uitgedruk word nie.

‘Womanism’ het tot stand gekom as gevolg van ‘n eksplisiete rassekritiek teen feminisme. Dit is ten gunste van die positiewe uitbeelding van swart mense. Dit word gekenmerk deur kulturele kontekstualisasie, die sentraliteit van die gesin en die belangrikheid daarvan om mans in te sluit.

Die geskiedenis van vroue in Suid-Afrika is verwant aan hul geskiedenis van onderdrukking as gevolg van patriargie. Vroue van verskillende rasse, kulture en klasse het patriargie op verskillende wyses in en variërende mate van erns ervaar. Onder voor-koloniale patriargie het vroue min sê gehad oor huwelikskeuses omdat mans dié besluite gedomineer het.

Die Nederlandse en Britse patriargale erfenis het neerslag gevind in die ideologie van die volksmoeder. Onderwyl dit veral manlike skrywers was wat die beeld van die vrou as versorger en tuisteskepper bevorder het, het vroue self ook hieraan ‘n aandeel gehad, sodat die volksmoeder volwaardig deel geword het van die Afrikaner nasionalistiese mitologie. Alhoewel middel- en werkersklas vroue met dié beeld geïdentifiseer het, het nie alle Afrikaanse vroue die ideologie aanvaar nie.

Onder die Victoriaanse erfenis was Britse vroue beperk to die private eerder as die openbare lewe. Die skeefgetrekte onderrigsisteem wat vroue in huishoudelike loopbane gekanaliseer het, die mag van mans oor hul vroue se eiendom en ‘n tekort aan toegang tot mag en geld het verseker dat vroue by die huis gebly het.

Wit Engelssprekende-vroue het die grootste geleentheid gehad om patriargie uit te daag vanweë hul toegang tot onderwys en die blootstelling aan liberale waardes, sê prof. Pretorius. Liberale vroue soos Helen Joseph en Helen Suzman het ‘n belangrike rol gespeel om in 1930 stemreg vir wit vroue in Suid-Afrika te verseker en het voortgegaan om ‘n rol te speel in die bevryding van swart vroue gedurende die vryheidstryd.

Die feminisme wat onder swart vroue ontwikkel het, was ‘n erkenning van die gemeenskaplike stryd met swart mans om die verwydering van die juk van eksterne onderdrukking en eksploitasie. Swart vroue in aktiewe en onafhanlike politiese rolle het tegelykertyd mans se aannames omtrent hul meerderwaardigheid asook die rassewette van die staat uitgedaag. Daarom kan ons sê dat die feminisme wat hier ontwikkel het, te voorskyn gekom het as gevolg van vroue se betrokkenheid by en toewyding tot nasionale bevryding, sê prof. Pretorius.

Institusionalisering is nie herlei tot magsvoordele nie, want gelykheid is nie in beleidsprogramme geïnkorporeer nie. Die hervestiging van sleutel aktiviste van die vrouebeweging in die regering het die stryd om genderbillikheid verander na ‘n projek wat deur die regering gelei word, sê prof. Pretorius. Ongelukkig word terreine van verandering buite die grense van die regering verwaarloos. Dit kan slegs aangespreek word deur ‘n aktiewe en feministiese stem in die burgerlike samelewing.

“Dit is my oortuiging dat formele instellings vir vroue binne die staat oor die lang termyn slegs effektief kan wees indien daar ‘n effektiewe feministiese vroue-beweging buite die staat in stand gehou word wat die grondslag waarop sosiale beleid gevorm word, kan uitdaag en bevraagteken. Daarom, A luta continua (die stryd duur voort),” sê prof. Pretorius.

Mediaverklaring
Uitgereik deur: Lacea Loader
Mediaverteenwoordiger
Tel: (051) 401-2584
Sel: 083 645 2454
E-pos: loaderl.stg@mail.uovs.ac.za
2 November 2004

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