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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 launches journal on name change
2008-11-14
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At the launch of the journal on name change were, from the left: Prof. Johan Lubbe, research associate of the Unit for Language Management at the UFS and guest editor of the magazine, Dr Lucie Möller, expert on geographical names and place name expert - and also an occasional member of the United Nations' committee of experts, Dr Peter Raper, research associate of the Unit for Language Management at the UFS, and Prof. Theo du Plessis, Director of the Unit for Language Management at the UFS. The magazine is dedicated to Dr Möller.
Photo: Lacea Loader
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UFS launches journal on name change
From all the language issues coved in the English and Afrikaans printed media, the name change of place names is receiving the most attention. This is according to Prof. Johan Lubbe, research associate from the University of the Free State’s (UFS) Unit for Language Management, during the recent launch of a journal on name change on the Main Campus in Bloemfontein.
In the journal it is found, among other, that, as a result of the nature of the new democratic foundation of the ANC controlled government which puts the interests of the majority first, there is a move in the thinking and execution of name change. In this way not only names change but art, culture and heritage matters are democratically thought through and planned.
“As a directive from the South African Language Board (Pansalb), the Unit for Language Management at the UFS annually compiles the SA Language Monitor which reports on the language rights situation in South Africa as mainly reported by the print media. Issues about name change appeared throughout and this is why the unit decided to publish a journal with various perspectives on this,” said Prof. Lubbe, who is also the guest editor of the journal.
Other topics discussed in the journal include, among others, language visibility, a historical overview of the change in place names, the Khoisan influence on naming and naming amongst Xhosa speakers.
In a contribution on language visibility it is found that geographical naming policy and the national language policy does not correlate and language visibility as language mechanism is not considered. In a historical overview on the change of place names it is found that name change was never a calculated, political process and only after 2000 mention was made of a conscious, orchestrated process of name change.
In a further contribution on the name change of Johannesburg International airport, it was found that the government, by ignoring the sentiments of the minority, made itself guilty of splitting the nation in spite of pronunciations that nation building is a priority. Where African languages are concerned, it was found that the English name is increasingly being discarded in favour of the Xhosa name. This is apparently connected to the language debate in South Africa.
The journal, “Kritiese perspektiewe op naamsverandering” (“Critical perspectives on name change”) is a supplement to the “Acta Academica”, an accredited national journal that is independently publishing selected research articles in the human sciences and interdissiplinary fields. Nine cooperators from across the country made contributions to the journal.
Media Release
Issued by: Lacea Loader
Assistant Director: Media Liaison
Tel: 051 401 2584
Cell: 083 645 2454
E-mail: loaderl.stg@ufs.ac.za
14 November 2008
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