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

New projects will enhance the infrastructure on our campuses
2011-02-04

 
Illustration:
The university's Main Gate in Nelson Mandela Avenue, as designed by The Roodt Partnership Architects.
 

A new entrance to the Main Campus, a high-performance centre, commercial gymnasium, rock-climbing wall, memorial garden for women and a botanical garden are but a few of the number of building and renovation projects that will take place at the Main Campus of the University of the Free State (UFS) in Bloemfontein. A number of projects are also being done on the Qwaqwa Campus.
On the Main Campus the entrance in Nelson Mandela Avenue is being adapted to match the university’s new corporative identity which was introduced last week. This project will be completed at the end of March 2011,
 
The creation of an environment conducive to the development of its students in the field of teaching, learning and research, as well as sports and culture is one of the main reasons why the UFS is renovating existing buildings and developing new infrastructure.
 
With the construction of a high-performance centre and commercial gymnasium, the university wants to create a work environment for its staff that will not only contribute to the cultivation of maximum work performance, but also to staff wellness. The centre with its foyer and administrative offices will furthermore consist of a health desk, university sports institute, sports sales, a spinning and aerobic centre, and dressing rooms. The total area will extend over 2114 m² and the construction will take approximately 18 months. This development will take place on the western side of the university’s Main Campus, directly opposite the Furstenburg Gate and next to the new student housing.
 
The UFS is also progressing well with other building projects which commenced last year. One of the projects is a new Education Building which is being constructed opposite the UFS Sasol Library. Upon completion this building will be used for the training of maths and science teachers in the Foundation Phase. It will include three classrooms for 100 students each and an auditorium for 225 students as well as an office block. The auditorium will also be used as a classroom. The building has been designed according to environmentally friendly principles to save water and use power effectively. It should be completed this year.
 
Planning for the construction of more student accommodation on the Main Campus as well as the Qwaqwa Campus is already well underway. On the Qwaqwa Campus, a residence with 200 beds is being constructed. This also includes a computer laboratory. According to the planning, this residence should be completed by the end of the first semester in 2011. Furthermore, four residences will be constructed on the Main Campus. These residences are in the planning phase.
 
In order to place technology within reach of Kovsie students and thereby empowering them, computer laboratories were installed at the respective residences. The computer laboratories will eventually make provision for approximately185 computers for student use. Proper security is also planned to safeguard the equipment.
 
Work to a new building for the Faculty of Health Sciences is also proceeding rapidly on the site where the vehicle pool and Hertz were previously used. This will include a lecture hall for 200 students, five venues for 100 students each, as well as offices. Students from the School for Medicine and Occupational Therapy will make use of these facilities.
 
The new building for the Faculty of Economic and Management Sciences between the Flippie Groenewoud Building and the Wynand Mouton Theatre is also coming along nicely.
 
On the university’s Qwaqwa Campus a new Education building is being constructed. This building will include a lecturing hall with 100 seats, four 50-seat classrooms, six offices, ablution facilities, a biology and science laboratory, as well as an information technology laboratory for 60 students.
 
In the meantime, existing buildings are being renovated on all the campuses. This includes, amongst others, improvements to the Architecture Building, the Biotechnology Building and the quarters for service workers on the Main Campus. Other improvements that have already been completed include the renovation of the Odeion’s foyer and the Callie Human Centre.
 
In future, students, staff and visitors to the UFS can also look forward to a rock-climbing wall at the Student Centre on the Thakaneng Bridge, a memorial park for women, residential accommodation within a sports environment, and a botanical garden.

 

Media Release
03 February 2011
Issued by: Lacea Loader
Director: Strategic Communication (actg)
Tel: 051 401 2584
Cell: 083 645 2454
E-mail: news@ufs.ac.za

 

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