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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

Fight against Ebola virus requires more research
2014-10-22

 

Dr Abdon Atangana
Photo: Ifa Tshishonge
Dr Abdon Atangana, a postdoctoral researcher in the Institute for Groundwater Studies at the University of the Free State (UFS), wrote an article related to the Ebola virus: Modelling the Ebola haemorrhagic fever with the beta-derivative: Deathly infection disease in West African countries.

“The filoviruses belong to a virus family named filoviridae. This virus can cause unembellished haemorrhagic fever in humans and nonhuman monkeys. In literature, only two members of this virus family have been mentioned, namely the Marburg virus and the Ebola virus. However, so far only five species of the Ebola virus have been identified, including:  Ivory Coast, Sudan, Zaire, Reston and Bundibugyo.

“Among these families, the Ebola virus is the only member of the Zaire Ebola virus species and also the most dangerous, being responsible for the largest number of outbreaks.

“Ebola is an unusual, but fatal virus that causes bleeding inside and outside the body. As the virus spreads through the body, it damages the immune system and organs. Ultimately, it causes the blood-clotting levels in cells to drop. This leads to severe, uncontrollable bleeding.

Since all physical problems can be modelled via mathematical equation, Dr Atangana aimed in his research (the paper was published in BioMed Research International with impact factor 2.701) to analyse the spread of this deadly disease using mathematical equations. We shall propose a model underpinning the spread of this disease in a given Sub-Saharan African country,” he said.

The mathematical equations are used to predict the future behaviour of the disease, especially the spread of the disease among the targeted population. These mathematical equations are called differential equation and are only using the concept of rate of change over time.

However, there is several definitions for derivative, and the choice of the derivative used for such a model is very important, because the more accurate the model, the better results will be obtained.  The classical derivative describes the change of rate, but it is an approximation of the real velocity of the object under study. The beta derivative is the modification of the classical derivative that takes into account the time scale and also has a new parameter that can be considered as the fractional order.  

“I have used the beta derivative to model the spread of the fatal disease called Ebola, which has killed many people in the West African countries, including Nigeria, Sierra Leone, Guinea and Liberia, since December 2013,” he said.

The constructed mathematical equations were called Atangana’s Beta Ebola System of Equations (ABESE). “We did the investigation of the stable endemic points and presented the Eigen-Values using the Jacobian method. The homotopy decomposition method was used to solve the resulted system of equations. The convergence of the method was presented and some numerical simulations were done for different values of beta.

“The simulations showed that our model is more realistic for all betas less than 0.5.  The model revealed that, if there were no recovery precaution for a given population in a West African country, the entire population of that country would all die in a very short period of time, even if the total number of the infected population is very small.  In simple terms, the prediction revealed a fast spread of the virus among the targeted population. These results can be used to educate and inform people about the rapid spread of the deadly disease,” he said.

The spread of Ebola among people only occurs through direct contact with the blood or body fluids of a person after symptoms have developed. Body fluid that may contain the Ebola virus includes saliva, mucus, vomit, faeces, sweat, tears, breast milk, urine and semen. Entry points include the nose, mouth, eyes, open wounds, cuts and abrasions. Note should be taken that contact with objects contaminated by the virus, particularly needles and syringes, may also transmit the infection.

“Based on the predictions in this paper, we are calling on more research regarding this disease; in particular, we are calling on researchers to pay attention to finding an efficient cure or more effective prevention, to reduce the risk of contamination,” Dr Atangana said.


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