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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

Africa and her diaspora grace the Africa Century International Writers’ Conference
2012-10-30

30 October 2012

Programme (Pdf format)

The Africa Century International African Writers’ Conference, organised by the wRite associates, in partnership with the Department of Arts and Culture, the University of the Free State (UFS) and the SABC, will take place on the Bloemfontein Campus of the UFS from 7 to 10 November 2012.This four-day conference will culminate in the 2012 South African Literary Awards ceremony where winners will be honoured.

The conference is dedicated to the memory and contribution of its special advisor and inspiration, Zwelakhe Sisulu, who passed away in October 2012.

The conference has attracted an array of scholars and artists from around the continent. The African diaspora will be one of the main features of the programme. Keynote addresses, the presentation of papers, dance, visual art, comedy, disc jockeying will all feature the Diaspora.
 
“This event will also mark the 21st anniversary of the then-OAU (now-AU) declared International African Writers’ Day (i.e. 7th November). The theme of this is: From Resistance to Creative Mediation: Celebrating a Century of Writing and Literary Intellectuals’ Influence On The Liberation Struggles & Political Impact on Literary Discourse and Development”, said Raks Morakabe Seakhoa, Managing Director of the wRite associates and Project Director of the South African Literary Awards and the Africa Century International African Writers Conference.
 
The patrons of the Africa Century International African Writers’ Conference include; Prof. Kgositsile Keorapetse, Prof. Chinua Achebe, Dr Nadine Gordimer, DrWanguiwaGoro and Dr Hugh Masekela.

“This prospective historical gathering of authors, literary scholars and historians will, as the then-OAU’s Conference of African Ministers of Education and Culture (meeting in Coutonou, Benin, in 1991) resolved, ‘…afford the African people a moment of pause within which to reflect on the contribution of African Writers to the development of the Continent’ ”,Seakhoa added.
 
He said, “We are delighted at the growth of the prestigious South African Literary Awards, as they are now spreading their wings to inaugurate the Africa Century International African Writers’ Conference and opening up to the continent and Diaspora’s writers.”
 
Other highlights of this four-day programme include:

  • An evening with the National Poet Laureate: poetry reading by Prof. Keorapetse Kgositsile and guest poets
  • Nobel Laureate, Nadine Gordimer discusses her latest work, ‘No Time Like The Present’
  • Poetry, comedy and performances
  • Creative writing skills development programme, facilitated by: Prof.KeorapetseKgositsile, Mr Walter Chakela and Dr Oswald Mtshali
  • Tsebo-Lethabo Primary and High Schools programme
  • Books, art & crafts and clothing exhibitions and more 

For more information,visit www.africacenturyconference.org or www.sala.org.za
 

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