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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.
UFS research project aims to stimulate reflection on theological studies
2017-06-20
The first book in the ‘UFS Theological
Exploration’ academic series, called Theology
and the Post(Apartheid) Condition, has just
been released.
Photo: Supplied
The first study book with the title Theology and the Post(Apartheid) Condition, which is part of a new academic series by the Faculty of Theology and Religion at the University of the Free State, is now available. Volume 1, compiled by Professor Rian Venter as editor, is the first book in the ‘UFS Theological Exploration’ academic series, which the faculty plans to release.
Transformation
Professor Venter says the transformation of processes and practices in communicating and creating knowledge has become an urgent task for public universities in a democratic South Africa. Much reflection has already gone into the methods and scope of transformation in higher education.
Although the faculty has done work on the implications of this for theology, there is one area of investigation that has not received much attention. It concerns the role of theological disciplines such as Old and New Testament, Missiology and Systematic Theology and Practical Theology, and specifically the relationship between academic disciplines and societal growth. The book focuses on these challenges and contains the intellectual undertakings of the contributors who are all lecturers, research fellows and post-graduate students linked to the faculty.
The questions
The key questions addressed are: what are the contours of the (post)apartheid condition and what are the implications for responsible discipline practices in theology. Professor Venter says the chapters in the book are logically arranged and moves from wider to more specific concerns. The first three chapters suggest broad perspectives on the challenges for theology in higher education, chart the changes, and make some suggestions for the future.
A dynamic field of study
The book states that theology has already experienced profound and radical changes over the past decade, which is known to us. All the chapters demonstrate these fundamental shifts, which have taken place in all theological sub-disciplines. Professor Venter says the contributions in the book illustrate that theology is a dynamic field of study, and is pursued with enthusiasm and commitment. Not all disciplines in theology are investigated for the book. However, the studies reflect the interests of the theologians in the Faculty of Theology at the UFS. Professor Venter hopes that the volume might stimulate further reflection of a similar nature by other theologians.
New insights
Through the ‘UFS Theological Exploration’ research series, the faculty hopes to stimulate new insights and new developments in academic progress and overall human growth. Series editor Professor Francois Tolmie says it is a fact that strong university research is necessary to achieve academic progress and advance human prospering. He says the faculty's research series will make a valuable contribution to these causes. Professor Tolmie says the ‘UFS Theological Explorations’ contains research of the highest academic standard which has been peer-reviewed to make significant educational contributions to core theological issues in South Africa and overseas.