Latest News Archive

Please select Category, Year, and then Month to display items
Previous Archive
20 August 2025 | Story Dr Annelize Oosthuizen | Photo Supplied
AnnelizeOosthuizen
Dr Annelize Oosthuizen, Subject Head of Taxation in the School of Accountancy, University of the Free State.

Opinion article by Dr Annelize Oosthuizen, Subject Head of Taxation in the School of Accountancy, University of the Free State 

 


 

With the two-pot retirement system having been effective from 1 September 2024, it is important to demystify certain aspects to prevent an unpleasant surprise when you retire. Although there are other complex rules, this article was simplified and does not deal with exceptions. It also does not deal with members of a provident fund who were 55 years of age or older on 1 March 2021. Furthermore, reference to retirement funds is to a pension fund, provident fund or a retirement annuity fund (a discussion on preservation funds is therefore excluded).

 

Three, not two pots

Firstly, there are effectively three pots and not two.

  • The first pot is referred to as the vested component. You will only have this component if you were a member of a retirement fund prior to 1 September 2024. This component consists of the member’s interest (balance) in the retirement fund on 31 August 2024 (the day before the implementation of the two-pot system) after being reduced with the amount of the seed capital that was transferred to the savings pot (see below).  This seed capital amount was calculated as the lesser of 10% of the value of the member’s interest in the fund on 31 August 2024 or R30 000. No further contributions will be allocated to this component from 1 September 2024. Upon retirement, one-third of the funds in this component can be taken in the form of a lump sum. The balance will be transferred to the retirement component below and will be paid out in the form of monthly annuities. 
  • The second pot is the savings component. The opening balance of the savings component is the seed capital that was transferred from the vested component above. Thereafter, from 1 September 2024, one third of your monthly contributions to the retirement fund are allocated to this component.
  • The third pot is the retirement component. From 1 September 2024, two-thirds of your monthly contributions to the retirement fund are allocated to this component. The funds in this component can only be accessed upon retirement (i.e. after reaching your retirement age, which is stipulated in the fund rules). Furthermore, upon retirement, the money in this pot is only paid out in the form of monthly annuities (i.e. monthly pensions) and no lump sum can be taken from this pot unless its total value is R165 000 or less.

Withdrawals are taxed unfavourably

Secondly, withdrawing from the savings component before retirement has adverse tax implications.

  • From 1 September 2024 onwards, one is allowed to make an annual withdrawal (minimum of R2 000) from the savings component even if you have not yet reached your retirement age and although you are still employed. It is, however, important to remember that such withdrawals are taxed very unfavourably since they are taxed by using the normal progressive tax tables that apply to your other income such as salary. If you wait for your retirement and only withdraw from this savings component upon retirement, the first R550 000 will be tax-free and withdrawals above R550 000 will be taxed at rates much lower than the current progressive tax rates applicable to other income.
  • Upon retirement, only the money in the savings component is allowed to be taken as a lump sum.  If you therefore withdraw all the money from this pot annually prior to retirement, you will not have any funds available to access as a lump sum on retirement and will only have access to the monthly annuities payable from your retirement component.

Less funds available

Lastly, for those members who have a vested component (i.e. who became members of the retirement fund before 1 September 2024), the old rules still apply to the funds in that component. Therefore, upon retirement, you will still be able to take one third of the value of your vested component as a lump sum. The balance will be transferred to the retirement pot and will be paid out in the form of monthly annuities.

To summarise, even though it might appear lucrative to withdraw from your savings component annually, it is advised that you refrain from doing it unless you really need the funds to fulfill basic needs. Withdrawing prior to retirement has the following adverse consequences:

  • Money withdrawn from the savings component is taxed at higher rates than what would have applied had you reached your retirement age and retired. You will therefore not make use of the R550 000 tax-free option.
  • You will have less funds available to pay out as a lump sum on retirement. As a simple calculation, had you not withdrawn R30 000 in a single year, conservatively calculated at a rate of 5%, this R30 000 would have grown to R79 599 (R139 829 if a rate of 8% is used) calculated over 20 years that can be withdrawn tax-free when utilising the R550 000 tax-free portion on retirement.

News Archive

UFS celebrates Africa Month
2017-05-24

 Description: ' Africa Month Tags: UFS celebrates Africa Month

Most of the international students at the UFS come from
the Southern African Development Community (SADC)
and other countries in Africa.

Photo: iStock

“Africa Month provides an opportunity
to every student and staff member to
commemorate African unity and celebrate
our rich cultural heritage, diversity,
energy and social dynamism.”

The University of the Free State (UFS) celebrates Africa Month to commemorate African unity and praise cultural heritage, as well as to take ownership of the future of the continent. According to Prof Heidi Hudson, Director of the Centre for Africa Studies, these are reasons to take part in the festivities.

Formation of Organisation of African Unity

Africa Day is the day on which Africa observes the creation of the Organisation of African Unity (OAU) on 25 May 1963. A total of 32 independent African states attended the formation.

The OAU’s aims were to promote unity and solidarity of the African states and act as a collective voice for the continent, in order to secure Africa’s long-term economic and political future and to rid it of remaining forms of colonialism. The OAU later gave birth to the African Union, which formally replaced the OAU in July 2002.

Prof Hudson says celebrating Africa Month forms part of her centre’s institutional mandate to promote an African focus in research, teaching, as well as public debate.

“Africa Month provides an opportunity to every student and staff member to commemorate African unity and celebrate our rich cultural heritage, diversity, energy and social dynamism. Secondly, by participating we all begin to take ownership of our future on this continent.”

She adds that Africa month provides a platform for reflecting on past experiences and achievements, as well as to critically assess the failures, challenges and the lessons learnt for the sake of a better future for the continent’s people.

Working relations across the continent

The UFS has working relations with universities, embassies and consulates in African countries such as Zimbabwe, Mozambique, Botswana, Zambia, Kenya, Namibia, Nigeria, Ghana, Uganda, and Tunisia.

Five cooperation agreements exist – they are with the Botho University (Botswana), Greater Zimbabwe University, Universidad Eduardo Mondlane (Mozambique), Trinity Theological Seminary Ghana, and Namibia Evangelical Theological Seminary.

According to Kanego Mokgosi, Senior Officer at Internationalisation, there are also working relations between the university and The Council for the Development of Social Science Research in Africa, Swedish International Development Agency and The United Nations Educational, Scientific and Cultural Organization. All of these focus on research development in Africa.

Most of the international students at the UFS come from the Southern African Development Community (SADC) and the continent. It hosts 1393 students from SADC countries.

“The UFS employs SADC protocol guidelines which, among others, enjoin SADC universities to admit at least 5% of their student population from the SADC region,” says Mokgosi.

Memorial Lecture by Dr Zeleza

On 24 May 2017 the Centre for Africa Studies hosted an Africa Day Memorial Lecture by Dr Paul Tiyambe Zeleza, the Vice Chancellor (President) of the United States International University Africa, Nairobi, Kenya.

The UFS library, in collaboration with the Department of English and the Office of International Affairs, also celebrated Africa Day on 25 May 2017. They hosted a conversation on the Land Debate in South Africa, together with the launch of a book titled White Narratives: The depiction of Post-2000 Land Invasions in Zimbabwe by Prof Irikidzayi Manase. He is an Associate Professor in the Department of English.

We use cookies to make interactions with our websites and services easy and meaningful. To better understand how they are used, read more about the UFS cookie policy. By continuing to use this site you are giving us your consent to do this.

Accept