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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

Resource Manual on Trafficking in Persons for Judicial Officers sees the light
2012-03-27

 

Judge Connie Mocumi, President of the South African Chapter of the International Association of Women Judges (SAC-IAWJ), during the launch of the Resource Manual on Trafficking in Persons for Judicial Officers.
Photo: Leonie Bolleurs
27 March 2012

On Human Rights Day the Department of Criminal and Medical Law in the Faculty of Law at the University of the Free State (UFS) hosted the launch of the Resource Manual on Trafficking in Persons for Judicial Officers compiled by the South African Chapter of the International Association of Women Judges (SAC-IAWJ).

The manual, which will be used by members of the South African judiciary, will equip officials in adjudicating the multifaceted crime of human trafficking.

“Presiding officers must be sensitised about the complexity of the crime. Human trafficking has many faces and presents itself in different ways. A person may for example be trafficked for sexual exploitation, forced labour, the removal of body parts, as well as forced marriages. Expert knowledge is needed to handle these cases effectively in court,” said Dr Kruger, also responsible for the human trafficking initiative in the Unit for Children's Rights at the UFS.

Prior to the launch, a total number of 300 judicial officers, including six judges from the Southern African Development Community (SADC) received training on human trafficking. After receiving this training, the officers were sensitised to scrutinise domestic violence cases as well as inter-country adoption cases in order to identify possible human trafficking activities.

As keynote speaker at the launch, Dr Beatri Kruger from the Department of Criminal and Medical Law at the UFS, said that human traffickers were running operations like a well-oiled machine. They have abundant and sophisticated resources and often bribe corrupt officials to further their criminal activities. In South Africa, people combating human trafficking struggle with a lack of resources as well as comprehensive legislation. Most cases are prosecuted under the Children’s Act and the Sexual Offences Amendment Act of 2007. Unfortunately, this legislation still leaves a gap in the prosecuting of perpetrators. Only trafficking cases where where children are trafficked can be prosecuted under the Children’s Act. In terms of the Sexual Offences Amendment Act perpetrators can be prosecuted for trafficking persons for sexual exploitation only, and not for labour of other forms of trafficking. Therefore the comprehensive Prevention and Combating of Trafficking in Persons Bill 2010 needs to be finalised to cover all forms of trafficking.

There are more slaves today than at any time in the history of humankind. “To combat this serious problem, we need to follow a holistic approach,” said Dr Kruger. This includes prevention (raising awareness), effective prosecution and suitable punishment, the protection of victims, and partnering with all relevant stakeholders, including people in the communities. Community members are often whistle blowers of this crime.

The President of the SAC-IAWJ, Judge Connie Mocumi, handed copies of the manual, a three-year project, to judicial officers present at the launch. The manual covers, among others, the definition of trafficking in persons, trafficking in persons in South Africa and the Southern African region, a legislative framework, victims’ rights and criminal proceedings.

“It is critical that judicial officers appreciate the phenomenon of trafficking in persons in its broader socio-economic context. Therein lays the ability to deal competently with the often-nuanced manifestation of this scourge. The incapacity to recognise these nuances can deny victims access to justice. In that regard, the manual, amongst others, is to become an important empowering adjudication tool for judicial officers,” said Judge Mocumi.

More copies will be printed and be ready for distribution by the beginning of May this year.

Judge Belinda van Heerden, who also attended the launch, said: “There is progress on the judicial and legislative front to bring wrongdoers to book. This manual will go a long way in giving judicial officers insight into the problem.”

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