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20 August 2025
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Story Dr Annelize Oosthuizen
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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.
Odeion School of Music Camerata to perform in Russia
2013-07-31
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| 31 July 2013 |
OSM CAMERATA "Die Spokewals" by Hendrik Hofmeyr under the baton of Jan Moritz Onken (YouTube)
After a successful audition, the Odeion School of Music Camerata (OSMC) received an invitation to participate in the 13th International Conservatory Festival which will take place in St Petersburg, Russia, from 1 to 9 November 2013. The festival is a yearly highlight on the concert calendar of the prestigious Rimsky Korsakov Conservatoire.
The artistic panel of the festival, under the leadership of Prof Lydia Volchek, annually selects ten international conservatories to gather in St Petersburg for the festival. Some of the participants include the Tchaikovsky Conservatoire: Moscow, Conservatoire de Paris, Eastman School of Music NY and the Sibelius Academy in Helsinki Finland. According to the Rector of the Rimsky Korsakov Conservatoire, Prof Mikhail Gantvarg, it will be the first ever school of music hailing from Africa to participate in the festival.
The OSMC was requested to give two recitals of 40 minutes each during the festival. Maestro Jan Moritz Onken (Chief Conductor of the OSMC for 2013) will lead the ensemble to St Petersburg. OSMC members will have the opportunity to attend all concerts presented by fellow participants as well as masters’ classes presented by the masters of St Petersburg Conservatoire.
The festival is usually opened and closed with a grand concert presented by the St Petersburg Conservatoire Symphony Orchestra (70 plus members). Last year the opening concert was conducted by the celebrated master, Valery Gergiev (artistic director of the Mariinsky Opera and Symphony Orchestra), while the closing ceremony was conducted by Semyon Bychkov – reciting the Leningrad Symphony by Shostakovich. Both Gergiev and Bychkov are alumni of the St Petersburg Conservatoire.
All recitals at the festival will be presented in the Opera and Theatre Hall of the Conservatoire, as well as in the acclaimed Glazunov Concert Hall located within the colossal conservatory building.
The OSMC will recite a programme of mainly South African composers, with two new works commissioned by the OSM New Music Initiative. These were written by the prolific South African composer, Hendrik Hofmeyr: laureate of the Queen Elizabeth International Composition Competition, entitled Spokewals / Phantom Waltz and Notturno Elegiaco. Spokewals / Phantom Waltz is a challenging work where musicians simultaneously play, sing and speak.
A reworked edition for chamber orchestra of the original string quartet for piano and soprano, Liedere op Boesman-verse, by revered South African composer, Stefans Grové, will also be performed. To commemorate the centenary of composer Benjamin Britten this year, Cantus in Memoriam of Benjamin Britten by Arvo Pärt is also included in the programme.
After participating at the festival in St Petersburg, the ensemble will depart for a two-day visit to Moscow where the OSMC will perform an ’All South African’ programme.