Latest News Archive

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

Demystifying the two-pot retirement system

20 August 2025 | Story Dr Annelize Oosthuizen | Photo Supplied

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

Degrees and diplomas are awarded

2009-09-01

The Spring Graduation Ceremony of the University of the Free State (UFS) took place in the Arena of the South Campus in Bloemfontein this week. Altogether 832 degrees and diplomas, 34 doctoral degrees, two honorary doctorates and a Councillor’s Medal were conferred.

All smiles. Three students who received the Advanced Diploma in Disaster Management at the spring graduation ceremony of the University of the Free State, are from the left: Oboneng Cynthia Tshitannye from Vryburg, Ramapulana Nkoana from Tzaneen and Sindisiwe Myide from Pietermaritzburg. The ceremony took place on the South Campus of the university.
Photo: Leatitia Pienaar

Diploma ontvang. Sowat duisend studente het in September op die Universiteit van die Vrystaat se lente-gradeplegtigheid grade of diplomas ontvang. Hier is Adri Lourens (links) van Medi-Clinic Bloemfontein wat die Gevorderde Universiteitsdiploma in Gemeenskapsverpleegkunde ontvang het, by haar ma, mev. Helen Lourens, ook van Bloemfontein.
Foto: Leatitia Pienaar

Thursday, 17 September 2009

Degrees in die Faculties of the Humanities, Health Sciences, Education, Law and Theology

Three students obtained their PhD degrees in Higher Education Studies. They are, from the left: Dr Liezel Massyn, Dr Andile Dandala and Dr Mpho Moagi-Jama. Dr Massyn, Teaching and Learning Manager in the Faculty of Economic and Management Sciences, completed her thesis titled “A framework for learning design in different modes of delivery in an adult learning programme”. Prof. Annette Wilkinson is her promoter and Dr Rika van Schoor is her co-promoter. Dr Dandala, Director: Quality Assurance at the Walter Sisulu University completed his thesis on “The challenges of designing a new programme and qualification (PQM) mix for a comprehensive university in South Africa”. His promoter is Prof. Johnny Hay and the co-promoter is Dr Louis van der Westuizen. Dr Moagi-Jama, a lecturer in the Faculty of Health Sciences completed her thesis on “Designing an academic support and development programme to combat attrition among non-traditional undergraduates”. Her promoter is Prof. Mabokang Monnapula-Mapesela and the co-promoter is Dr Adri Beylefeld.
Photo: Leonie Bolleurs

UFS awards degrees in health sciences

This week the University of the Free State (UFS) held its spring graduation ceremony on the South Campus in Bloemfontein. At this occasion George Visser received his M.Med. (Anes), Wilandi Jacobs received her M.Med. (Surgery) and Deon Menge received his M.Med. (Surgery) in the Faculty of Health Sciences.
Photo: Leonie Bolleurs

Megan Murphy (left) and Danielle Rose received their B.Soc.Sc. qualifications in the Faculty of the Humanities.
Photo: Leonie Bolleurs

Dumisane Nxumalo received his Master’s Degree in Labour Law in the Faculty of Law.
Photo: Leonie Bolleurs

Former Kovsies see their daughter graduate
Mr Danie Botha and his wife Alta today attended their daughter, Marali’s graduation ceremony. Marali received her B.Ed. qualification in the Faculty of the Education at the University of the Free State (UFS). Mr and Mrs Botha are alumni of the university.
Photo: Leonie Bolleurs

Spring graduation ceremony held at the UFS

At this year’s spring graduation ceremony of the University of the Free State (UFS) that was held on the South Campus, Cordelia de Waal received her B.Soc.Sc. Honours degree and Danie de Klerk received his B.A. degree in Language Studies and English. Both these qualifications are presented in the Faculty of the Humanities.
Photo: Leonie Bolleurs

Youngest Ph.D. in education awarded at the UFS

Dr Nalize Marais (second from the left), Senior Officer at the University of the Free State's (UFS) Centre for Higher Education Studies and Development (CHESD), today became the youngest student in the history of the university to receive a Ph.D. in education. Her she is with Dr John Bowes (left), Deputy Principal at Bedelia Primary in Welkom, Prof. Rita Niemann, Associate Professor in the Department of Comparative Education and Education Management and promoter of the three students, and Dr Ben Oosthuyse, teacher at Voortrekker High School in Bethlehem. Dr Marais submitted her thesis at the age of 27. All three students received a Ph.D. in Education Management.
Photo: Leonie Bolleurs

Wednesday, 16 September 2009

Degrees in die Faculties of Natural and Agricultural Sciences and Economic and Management Sciences were awarded.

Two honorary doctorates and one Council Medal were awarded during the Chancellor’s Dinner. Prof. Johan Grobbelaar, Senior Professor in the Department Plant Sciences received the Councillor’s Medal for dedicated service to the UFS for more than 40 years, Judge Louis Harms received the degree Doctor Legum (Honoris Causa) and the degree Philosophiae Doctor (Honoris Causa) was conferred upon Mr Johan Loock. At the Chancellor’s Dinner were, from the left: Prof. Grobbelaar, Dr Franklin Sonn, Chancellor if the UFS, Judge Harms, Judge Faan Hancke, Chairperson of the UFS Council and Mr Loock.
Foto: Stephen Collett

The degree B.Com. Economics was awarded to Heinrich Brüssow, Springbok and Cheetah rugby player and former Shimla player. Here is Heinrich with Prof. Jonathan Jansen, Rector and Vice-Chancellor – one of his biggest supporters.
Photo: Lacea Loader

Prof. Helena van Zyl, Director of the UFS School for Business (in the front in the red gown) together with the group of MBA students who graduated.
Photo: Lacea Loader

Azar Debbo (right) received the degree B.Sc. Genetics. With him is his brother Alec, who received the degree B.A. in Drama and Theatre Arts from the UFS in 2007, and their father Al Debbo, comedian, actor and singer.
Photo: Lacea Loader

From the left is: Matseliso Phafoli, who received an B.Com.Hons. in Economics, Kenekwe Moumo, who received the degree B.Com.Hons. in Financial Economics and Managerial Accounting, and Teboho Maichu, who also received a B.Com.Hons. degree in Financial Economics and Investment Management.
Photo: Lacea Loader

The degree B.Com.Hons. in Psychological Equivalence was awarded to Robynne Sudbury and Siyabonga Nyembe received received a B.Sc. degree in Biochemistry.
Photo: Lacea Loader

Back

Economic and Management Sciences

Education

Health Sciences

The Humanities

Law

Natural and Agricultural Sciences

Theology and Religion

Open Distance Learning

Business School

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