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Demystifying the two-pot retirement system

20 August 2025 | Story Dr Annelize Oosthuizen | Photo Supplied

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 implements access control measures on our Bloemfontein Campus

2014-11-21

Photo: Hannes Pieterse

Online Application form: non personnel

Map with access gates on the Bloemfontein Campus

Accessing the Bloemfontein Campus from 3 November 2014

Access control during major events on the Bloemfontein Campus

Q&A

The University of the Free State (UFS) has been tightening security measures on its Bloemfontein Campus for quite some time now. Purposefully, we have consolidated several safety measures to keep our students, staff and visitors – the heartbeat of our university – protected.

Our most significant step in this endeavour is now in the process of implementation. All five entrance gates to the campus are being equipped with strict access control.

The first phase of the process was implemented beginning of August 2014. Gates 2 (Badenhorst Street) and 4 (Furstenburg Street) were equipped with card readers. Only persons with valid access cards can enter and leave through these gates. Existing staff and student cards are equipped to be read by the short-distance card readers at the gates in order to activate the booms.

At this stage, staff and students are swiping their cards against the card readers at Gates 2 and 4 or holding it not further than 20 mm from the reader for the boom to open. Card holders now physically stop in front of the boom in order to get access to the campus.

The duel-frequency card:

The dual-frequency cards available at the Card Division on the Thakaneng Bridge are currently out of stock. New cards will be delivered on Friday 14 November 2014.

The special offer of R30 per access card has been extended to the end of November 2014. To qualify for this offer, staff and students may pay the R30 for a dual-frequency card at the bank or cashiers on the Thakaneng Bridge no later than 28 November. The cost of dual-frequency cards will increase to R60 per card from 1 December 2014.

Please note that only people with vehicles need to apply for dual-frequency cards.

Students and staff will, however, still be able to gain access to the Bloemfontein Campus with their current cards (in the case of staff and students who haven’t purchased dual-frequency cards yet). As is currently the practice at the gates in Furstenburg and Badenhorst Streets, you will have to stop when you reach the boom, swipe your card past the card reader, the boom will open and you will be able to drive through.

Staff and students using their dual-frequency cards should:

-       Reduce speed
-       Hold the card in a vertical position at the driver’s side window, in the direction of the long-distance reader (see photo)

It is therefore not necessary to stop in front of the boom. On holding your card upright, in line with the card reader, the gate will open automatically and you will be able to drive through (keep your card outside your window; the card reader cannot operate through tinted windows).

Please note that this arrangement only applies to incoming lanes. On leaving the campus, the card has to be swiped. This is due to the number-plate recognition technology installed at exits for additional security.

If the long-distance reader does not work, the dual-frequency card can still be used at a tag reader.

Applying for your new card:

Electronic fund transfers: Absa Bank: 1 570 8500 71, Ref: 1 413 07670 0198, OR pay the R30 at the UFS Cashiers, Thakaneng Bridge. Please note that the price of the cards will increase to R60 from 1 November 2014.

Take your existing personnel or student card, together with proof of payment, to the UFS Card Division, Bloemfontein Campus, Thakaneng Bridge, to have your photo taken and your new dual-frequency card issued.

Permission to access specific UFS buildings or facilities linked to your existing card, will be automatically linked to the new card.

The new card is marked ‘dual’ on the back in the right, bottom corner.

The UFS Cashiers will provide assistance between 09:00 and 14:30, and the UFS Card Division between 09:00 and 15:00.

Implementation of full access control

Full access control will be implemented on the UFS’s Bloemfontein Campus from 3 November 2014. This means that access control will be implemented at all gates on the Bloemfontein Campus.

Who is using which gate? See Q&A for more information.

Gate 3 (Wynand Mouton Drive) is earmarked for use by official card holders. These include students, staff and persons doing business on campus. Parents dropping and fetching their children for sports, as well as service providers of the UFS, such as architects, may apply for valid cards. These persons will have to provide proof that they have business on campus (complete online application form and sign declaration).

All visitors to the campus will be referred to the Visitor’s Centre at Gate 5 (DF Malherbe Drive). This include, among others, parents, family and friends of students, as well as conference delegates. It is estimated that the Visitor’s Centre will be completed at the end of November (note that the gate at DF Malherbe Drive will be operational by 3 November 2014). Visitors will sign in at the Visitor’s Centre and, depending on the business they have on campus, they will only be allowed on campus for a certain period of time.

•    Lane 1 at Gate 5 will be used by visitors and service providers to enter the campus. Only card holders will be able to use lane 2.
•    Buses and trucks can also enter the campus through Gate 5.

The construction at the Main Gate at Nelson Mandela Drive is to build one extra lane for incoming traffic. The project is estimated to be completed at the end of October 2014.

•    For outgoing traffic, lane 1 (furthest from the guardhouse) and lane 2 will only be used by card holders and lane 3 (closest to the booth) will be used by service providers.
•    For incoming traffic, lanes 2 and 3 were set aside for use by only service providers. Lanes 1 and 4 will be used by only card holders.

Pedestrians

All gates for motorists will also be equipped with a pedestrian thoroughfare on completion of the project. Persons using these pedestrian gates also need to use their cards to get access to the campus.

Pedestrians who are visitors, but aren’t in possession of a valid access card, should please go to the Visitor’s Centre at the gate in DF Malherbe Drive where they will be helped.

More information

For more information on access control at the UFS, please watch our videos and read the Q&A or e-mail your enquiries to accesscontrol@ufs.ac.za.

Issued by: Lacea Loader (Director: Communication and Brand Management)
Tel: +27(0)51 401 2584 | +27(0)83 645 2454
E-mail: news@ufs.ac.za

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