Latest News Archive

Please select Category, Year, and then Month to display items
Previous Archive
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

Founding meeting of the Advisory Panel of the International Institute of Diversity
2008-11-21

The University of the Free State (UFS) today (20 November 2008) successfully convened and hosted the founding meeting of the Advisory Panel of the International Institute of Diversity.

In the wake of the Reitz video incident, the UFS wishes to establish an institute that will study and promote transformation on the campus as a microcosm of the much broader socio-political challenges facing South Africa. It is hoped that in due course the UFS and the institution will develop the expertise and experience to help other organisations and societies in transition.

The institute will work closely with the Transformation Cluster – one of six strategic academic clusters already created as part of the university’s long-term strategic plans.

Given the transformation climate in which it finds itself, the university recognises that the guidance, support and direct involvement of thought leaders and other specialists in the field of transformation are critical to the design and operation of the proposed institute. To this end, the university has established an advisory panel for the institute. The Advisory Panel will give guidance to the Executive Director (to be appointed) in helping with the conceptualisation, design, and development of the institute, and the compilation of its business plan.

Brian Gibson Issue Management facilitated the meeting and is also responsible for the reporting on the meeting. The International Institute for Development and Ethics (IIDE) co-hosted and provided the secretarial support for the meeting.

 


The members of the advisory panel:  

(Click here to read more about the Panel Members)

External panel members:

Dr Clint Le Bruyns, Senior Lecturer in Public Theology and Ethics at the University of Stellenbosch .

Dr Sebiletso Mokone-Matabane, Chief Executive Officer, Sentech Limited.

Dr Andries Odendaal works in the field of conflict transformation with international agencies such as the United Nations, DANIDA and GTZ.

Prof. Lungisile Ntsebeza, National Research Foundation (NRF) Research Chair in Land Reform and Democracy in South Africa in the Department of Sociology, University of Cape Town.

Mr Roger Crawford, Executive Director for Government Affairs and Policy South Africa, Johnson & Johnson.

Prof. Jonathan Jansen, Dean of the Faculty of Education, University of Pretoria 2001 to 2007.

Ms Zandile Mbele, Director of Plessey (PTY) Ltd. and the Transformation Executive for Dimension Data.

Dr André Keet, Director: Transdisciplinary Programme at the University of Fort Hare in October 2008 and part-time Commissioner with the Commission for Gender Equality.


Dr Reitumetse Obakeng Mabokela is an associate professor in the Higher, Adult, and Lifelong Education Program in the Department of Educational Administration at Michigan State University.

Dr Mpilo Pearl Sithole is a senior research specialist in the Democracy and Governance Research Programme at the Human Science Research Council.

Professor Steven Friedman, D.Litt. is Director of the Centre for the Study of Democracy at Rhodes University and the University of Johannesburg.

Representatives from UFS:

Prof. Teuns Verschoor, Vice-Rector: Academic Operations at the University of the Free State, and currently Acting Rector and Vice-Chancellor.

Prof. Piet Erasmus, Interim Co-ordinator for the Cluster Transformation in Highly Diverse Societies.

Prof. Lucius Botes, Director of the Centre of Development Support and Programme Director of the Postgraduate Programme in Development Studies.

Prof. Philip Nel, Former Director of the Centre for Africa Studies at the UFS.
 

We use cookies to make interactions with our websites and services easy and meaningful. To better understand how they are used, read more about the UFS cookie policy. By continuing to use this site you are giving us your consent to do this.

Accept