Latest News Archive
Please select Category, Year, and then Month to display items
20 August 2025
|
Story Dr Annelize Oosthuizen
|
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.
Teacher professionalism and status under Commonwealth radar
2010-03-26
 |
From the left are: Ms Simone De Cormarmond, Chairperson: Commonwealth Foundation; Prof. Jonathan Jansen, Rector and Vice-Chancellor, University of the Free State (UFS); Mr Samuel Isaacs, CEO: SAQA; and Dr Carol Anne Spreen, Lecturer at the University of Maryland, USA).
Photo: Ian van Straaten |
International delegates attending the 5th Annual Commonwealth Teacher Research Symposium held at the University of the Free State (UFS) in Bloemfontein this week unanimously agreed that more research still had to be done on issues of recognition, registration and standards affecting teachers and teaching across Commonwealth countries.
This two-day gathering of researchers, officials and representatives of regional international organisations and higher education institutions agreed that issues of teacher migration, the professionalism of teachers, teacher preparation and the use of teaching standards, as well as the comparability and recognition of teacher qualifications should be further researched.
The delegates agreed on the following based on the research and data that were presented and shared with all the participants:
Teacher migration is recognised as an increasing global phenomenon that requires ongoing research in the Commonwealth.
Recognising that inequalities and differences within and across Commonwealth countries exist, and considering that fair and ethical treatment in the international recruitment of teachers is an important cornerstone of the Commonwealth Teacher Recruitment Protocol.
Teacher training, the recognition of teacher qualifications, the professional registration of teachers and the development of professional teacher standards should be actively encouraged through ongoing pan-Commonwealth research.
An increased acknowledgement of the role of the professionalisation of teachers through an improved understanding of teacher qualifications and standards.
There should be a specific research focus on teacher preparation and the use of teaching standards.
An increased comparability and recognition of teacher qualifications across Commonwealth countries should be actively encouraged.
Advocacy of teachers’ rights, effective protection of the vulnerable teacher, and appropriate strategies should be promoted to uplift the status of teachers and teaching as a profession.
The Commonwealth Teacher Recruitment Protocol, amongst other things, aims to balance the rights of teachers to migrate internationally against the need to protect the integrity of national education systems, and to prevent the exploitation of the scarce human resources of poor countries.
Delivering his keynote address at the symposium, the Rector and Vice-Chancellor of the UFS, Prof. Jonathan Jansen, decried the quality of professional qualifications in South Africa.
“We have become very good at manufacturing outcomes. We actually have become very good at giving an impression of having achieved particular outcomes without having achieved them at all,” he said.
“So what does it mean to talk about outcomes in an unequal country with unequal resources? What does it mean to talk about qualifications when we do not trust the outcomes?”
He suggested that the teaching profession should be subjected to a peer review mechanism and that the practice of setting minimum standards should be dealt away with because it results in minimum outcomes.
Dr Carol Anne Spreen, lecturer at the University of Maryland in the USA, proposed that countries should improve the quality of their own teachers instead of importing teachers from other countries.
The research symposium was organised by the Commonwealth Secretariat and hosted by the South African Qualifications Authority (SAQA) and the UFS.
Media Release
Issued by: Mangaliso Radebe
Assistant Director: Media Liaison
Tel: 051 401 2828
Cell: 078 460 3320
E-mail: radebemt@ufs.ac.za
26 March 2010