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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

UFS Odeion School of Music (OSM) launched
2011-09-15

The University of the Free State’s (UFS) Odeion School of Music will be launched at the first Dean’s Concert in the Odeion on the Bloemfontein Campus on Friday, 16 September 2011.

The former Department of Music, in the Faculty of Humanities, has been transformed and will henceforth be known as the Odeion School of Music (OSM). This follows in the path of the corporate transition currently taking place at the university, which aims to reflect the progressive and dynamic striving towards excellence, as endorsed by the UFS Vice-Chancellor and Rector, Prof. Jonathan Jansen, and his management group.
 
Two years ago the faculty formulated a new mission with the aim to become an international faculty of excellence. An important component of it has been to create a pro-active marketing strategy and policy towards internationalisation and curriculum development.
 
The name Odeion School of Music portrays not only an excellent asset in the Free State, but also nationally and internationally. The school’s new name bears the respected Odeion brand and a number of successful and respected ensembles operate under this brand. These include the acclaimed residential Odeion String Quartet, as well as the Music Department’s student ensembles, the Junior Odeion String Quartet, the Odeion Sinfonia, and the Odeion Choir.
 
According to Prof. Nicol Viljoen, the Chairperson of the OSM, the name change was motivated by the following objectives:
  • The idea of a school within the Faculty of Humanities not only reflects an academic profile that does justice to the intention of the Department to reposition itself, but also simulates the current identity of the unit. This encompasses diverse thematic entities not only from an academic perspective, but also from a community and cultural perspective. The unit does this through providing services, which include arts entertainment, the provision of facilities, as well as a strong emphasis on community development.
  • With regard to an international perspective, it provides attractive possibilities not only from the perspective of a marketing and publicity profile, but also with regard to the identity of the unit.  
  • Hypothetically the new name allows more flexibility to complement the profile with reference to newly anticipated developments. These include the application of prestigious international experts as artistic fellows, membership to progressive European, jointly developed degree programmes and curriculum development initiatives, the founding of a chair in Orchestra Conducting, a master’s degree in Arts Management, as well as the incorporation of bio-kinetics in the teaching methodologies of performance practice, to name but a few.
  • From a management perspective it could also consolidate the perspective of scarce skill specialisation.
  • To give momentum to the establishment of the OSM, Mr Marius Coetzee was appointed as Innovation Manager. He is a former Project Manager of the European Degree in International Music Management – a joint degree initiative between three Universities from Norway, the Netherlands and Finland, funded by the EU in Brussels. His aim will be to develop and investigate aspects such as internationalisation, marketing, pro-active recruitment strategies, curriculum development and innovative teaching methodologies.
Mr Coetzee said music conservatories, from both European and American perspectives are managed and maintained as highly successful and substantial brands. From the European perspective some examples include the Sibelius Academy in Helsinki (Finland), the Liszt Academy in Budapest (Hungary), the Grieg Academy in Bergen (Norway) and the former Sweelinck Academy in Amsterdam (Netherlands). Similar to the South African milieu, the majority of music conservatories in the USA and Canada are resident within an academic university.
However, unlike the South African reality, the majority of these institutions have a value-added identity portrayed by a specific name. Such an example is the renowned Peabody Conservatory of the University of Baltimore or the Jacobs School of Music at the Indiana University Bloomington, to name but a few.
 
The Dean’s Concert will highlight performances of students in the school. The concert will probably become a regular event in future Spring Music Festivals.


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

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