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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

UFS Camerata ends concert season on a high note
2017-11-02

Description: UFS Camerata  Tags: UFS Camerata  

The final concert at Endler Hall at Stellenbosch University, presented by the
Endler Concert Series, was attended by the UFS Rector and Vice-Chancellor,
Prof Francis Petersen and Mrs Cheslyn Petersen. Here, on stage, is Prof Petersen
with the Camerata.
Photo: Supplied

The OSM Camerata (OSMC) of the Odeion School of Music at the University of the Free State ended the 2017 concert season on a high note with two gala concerts presented in the Western Cape as part of the ensemble’s fifth birthday celebrations. The first concert took place at the well-known Hugo Lambrechts Auditorium in Parow on 20 October 2017. A Stellenbosch University audience also had the privilege of listening to the Camerata at Endler Hall the following day.

A substantial part of the concert programme recited during the concerts was dedicated to prolific South African composer, Prof Hendrik Hofmeyr, in honour of his 60th birthday on 20 November 2017. The ensemble recited Super Flumina Babylonis, Notturno Elegiaco & Spokewals/Phantom Waltz - all works commissioned from Prof Hofmeyr for the OSMC.

The Odeion School of Music awarded the Order of the OSM to Prof Hofmeyr during the concert in gratitude for his tremendous contribution as a South African composer.

The final concert at Endler Hall, presented by the Endler Concert Series, was attended by the UFS Rector and Vice-Chancellor, Prof Francis Petersen, and Mrs Cheslyn Petersen.

According to Marius Coetzee from the Odeion School of Music, the OSMC was strategically founded in 2012 as the OSM’s flagship chamber orchestra with its main objective being to create a catalyst for excellence. From a pedagogical perspective, the OSMC serves as an incubator to nurture fully rounded musicians who are thoroughly prepared for the demands of their trade as orchestral musicians, soloists and conductors. 

Responding to the demand for excellence, on 1 September 2017 it was announced that the OSMC received first prize for the 2017 Ictus International Music Competition (US) as the winner of the category for Conservatory and University Orchestras.

Louis van der Watt, head of strings at the University of Stellenbosch Conservatory and vice conductor of the university’s symphony orchestra, remarked that the OSMC presented an excellent concert. Audience members concurred, saying the OSM Camerata was setting new standards for orchestral playing in South Africa.

Review from Louis van der Watt, University of Stellenbosch (available in Afrikaans)

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