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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

Dr Makutoane to present research on world stage in US
2017-06-14

“If the SBL has acknowledged you,
it means the research you are doing
is solid. There are people out there
who want to listen to my paper.”

To present a research paper at an international conference of about 10 000 people and where 100 sessions are taking place at the same time is what dreams are made of for an academic. This is no longer a dream for the humble Dr Tshokolo Makutoane who will share his knowledge at the annual meeting of the prestigious Society of Biblical Literature (SBL).

Dr Makutoane, a senior lecturer at the Department of Hebrew at the University of the Free State (UFS), will be a speaker at the conference in Boston, in the US, from 19-21 November 2017. This after receiving a remarkable travel grant from the SBL to present his paper, titled The Contribution of Linguistic Typology for the Study of Biblical Hebrew in Africa: The Case of Sesotho Pronouns.

Description: Dr Makutoane to present research on world stage in US Tags: Dr Makutoane to present research on world stage in US

Dr Makutoane, senior lecturer at the Department of
Hebrew at the University of the Free State, was
speechless when he heard he will be presenting a
paper at the annual meeting of the Society of Biblical
Literature in Boston in the US.
Photo: Jóhann Thormählen

Scholars from around the world participate
His paper is part of a thematic session on “Theoretical Approaches to Anaphora and Pronouns in Biblical Hebrew” in which scholars from Canada, the US, Australia, Europe and Israel will participate.

The research Dr Makutoane will be showcasing in Boston is about teaching Biblical Hebrew in Africa, and more specifically, pronouns, to Sesotho-speaking students.

“SBL is one of the largest organisations in the world and if you get the opportunity to present a paper there, it is one of the highest honours in our context you can have,” Dr Makutoane said.

“If the SBL has acknowledged you, it means the research you are doing is solid. There are people out there who want to listen to my paper.”

According to the SBL website (https://www.sbl-site.org) more than 1 200 academic sessions and workshops will take place at the conference, co-hosted by the SBL and the American Academy of Religion.

Highlight of researcher’s entire career
Receiving the grant and attending the conference for the first time is the highlight of Dr Makutoane’s career. “I feel very grateful, honoured and humbled. I was speechless when I heard about it. I couldn’t help myself and actually cried,” he said.

The grant, given to only four SBL members – the other three are from Samoa, Nigeria and India – is intended to support under-represented and under-resourced scholars who demonstrate a financial need.

Dr Makutoane thanked his mentors, Prof Jacobus Naudé and Prof Cynthia Miller-Naudé, who assisted him with the application. Naudé is a senior professor at the Department of Hebrew and Miller-Naudé a senior professor and head of the department.

Dr Makutoane, who studied Theology at the UFS and is a minister at the NGKA Rehauhetswe church near Bloemfontein, is also grateful to his church that gave him the opportunity to study at the UFS and be able to work at the university.

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