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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 teams up with Department of Agriculture and donates latest farming technology to Oppermans
2009-03-09
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Attending the recent launch of the latest technology that measures the salinity of soil – the EM38 system – during an information day held in Jacobsdal were, from the left, back: Mr Robert Dlomo, a farmer from Pietermaritzburg in KwaZulu-Natal, Prof. Leon van Rensburg, Department of Soil, Crop and Climate Sciences at the UFS, Mr Sugar Ramakarane, head of the Department of Agriculture in the Free State, Dr Motseki Hlatshwayo, national Department of Agriculture, and Prof. Herman van Schalkwyk, Dean of the Faculty of Natural and Agricultural Sciences at the UFS; front: Mr Robert Smith and Mr Fagan Scheepers from Oppermansgronde, who will be working with the EM38 system in the area.
Photo: Landbouweekblad |
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UFS teams up with Department of Agriculture and donates latest farming technology to Oppermans
Emerging and commercial farmers of the Oppermans Community in the Northern Cape will now be able to monitor the salinity levels on their farms effectively for the first time.
This is as a result of a donation of the latest technology that measures the salinity of soil – the EM38 system – which the University of the Free State (UFS) is donating to the community.
The unique project was launched by the Department of Soil, Crop and Climate Sciences at the UFS and the Department of Agriculture in the Free State during an information day held at Jacobsdal recently.
The day was attended by members of the Oppermans Community and representatives of the UFS as well as the Department of Agriculture. Mr Sugar Ramakarane, Head of the Department of Agriculture in the Free State, did the welcoming and several academics from the UFS held discussions about various topics related to the salinity levels in soil.
Since the establishment of the Oppermans Community emerging farmers are now for the first time able to accurately monitor the salinity levels on their farms as well as that of irrigation schemes of commercial farms in the area.
“In a region such as the Northern Cape it is very important that the salinity level of soil is monitored properly. As water is administered to crops, salts accumulate in the soil because the roots leave most of the salts in the soil when it transpires. When the salinity of soil increases, the osmotic potential thereof can also increase, which can seriously damage the water intake of crops and can create loss in yield and income,” said Prof. Leon van Rensburg from the Department of Soil, Crop and Climate Sciences at the UFS and leader of the Oppermans Project.
To assist the farming community of Oppermans to apply precision farming and to measure the salinity level of soil more accurately the latest technology that measures salinity in soil – the EM38 – will be donated to the community. Although the system is used throughout the world, the UFS is the only tertiary institution in the country that owns the latest version of this system.
“We are also training two persons from the Oppermans Community as technicians that will monitor the use of the system. The advantage of the donation of the system for the university is that we can gather data that can be used for research purposes by our Master’s and Doctoral students. We also want to see if water-table heights can be measured with this system,” said Prof. Van Rensburg.
According to him the system has several advantages for the community’s emerging farmers. “For the first time the salinity level of soil can now be measured accurately, salt maps can be drawn up, we can advise farmers about the corrections that need to be made and salinity management plans can be compiled,” he said.
The system is very accurate as it takes measurements every 200 mm while it is pulled by a four-wheel motorbike. The readings provide the distribution of salts up to a soil depth of 1 500 mm. “In the past the measuring of salinity levels was time-consuming and the cost thereof was R90 for one sample. The new system is more cost-effective,” stated Prof. Van Rensburg.
The instruments will be handed over to the African Spirit Group of the Oppermans Community, who will then become the owners. The service to farmers will then be managed by an operational group consisting of people from the Oppermans Community, a postgraduate student who can compile salinity maps and Prof. Van Rensburg, who will act as project leader and advisor.
The system will also be made available to farmers at the Riet River and Vaalharts Schemes.
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
9 March 2009
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