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20 August 2025
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Story Dr Annelize Oosthuizen
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Photo Supplied
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.
Game farming a lens to analyse challenges facing democratic SA – Dr Kamuti
2017-05-30
Dr Tariro Kamuti, Postdoctoral Fellow at the Centre
for Africa Studies at the University of the Free State.
Photo: Rulanzen Martin
One of the challenges facing South Africa’s developing game farming policy is the fractured state in the governance of the private game farming sector, says Dr Tariro Kamuti.
Dr Kamuti, a Postdoctoral Research Fellow at the Centre for Africa Studies (CAS) at the University of the Free State (UFS), was presenting a seminar on Wednesday 17 May 2017 under the topic, Private Wildlife Governance in a Context of Radical Uncertainty: Challenges of South Africa’s Developing Game Farming Policy, which takes material from his PhD. He received his PhD from both the Vrije University in Amsterdam and the UFS in 2016.
His presentation explored how the private game industry positions itself in accordance with existing agricultural and environmental regulations. It also investigated the state’s response to the challenge of competing needs over land and wildlife resources which is posed by the gaming sector. “The transformation of the institutional processes mediating governance of the private game farming sector has been a long and enduring arrangement emerging organically over time,” Dr Kamuti said.
Game farming links wildlife and agricultural sectors
“I decided on this topic to highlight that game farming links the wildlife sector (associated with conservation and tourism) and the agricultural sector. Both make use of land whose resources need to be sustainably utilised to meet a broad spectrum of needs for the diverse South African population.
“The continuous skewed ownership of land post-1994 justifies questioning of the role of the state in confronting challenges of social justice and transformation within the economy.”
“Game farming can thus be viewed as a lens through which to study the broad challenges facing a democratic South Africa, and to interrogate the regulatory and policy framework in the agricultural and wildlife sectors at their interface,” Dr Kamuti said.
Challenges facing game farming policies
The state alone does not apply itself to the regulation of private gaming as a sector. “There is no clear direction on the position of private game farming at the interface of environmental and agricultural regulations, hence game farmers take advantage of loopholes in these institutional arrangements to forge ahead,” Dr Kamuti said.
He further went on to say that the state lacked a coherent plan for the South African countryside, “as shown by the outstanding land restitution and labour tenant claims on privately owned land earmarked for wildlife production”.
The South African government was confronted with a context in which the status quo of the prosperity of the middle classes under neoliberal policies was pitted against the urgent need to improve the material well-being of the majority poor. Unless such issues were addressed, this necessarily undermined democracy as a participatory social force, Dr Kamuti said.