Latest News Archive

Please select Category, Year, and then Month to display items
Categories
UFS News Media Release Research
Years
2019 2020 2021 2022 2023 2024 2025
Months
January February March May April June July August September October November
Previous Archive
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

UFS in joint venture with Empowerdex
2006-11-17

The University of the Free State (UFS) today became the first tertiary institution in the country to sign a joint venture agreement with Empowerdex, South Africa’s foremost black economic empowerment (BEE) ratings agency, to train BEE practitioners that will implement BEE across all sectors of the economy.
 
The agreement was signed by Mr Vuyo Jack, Executive Chairman of Empowerdex and Prof Frederick Fourie, Rector and Vice-Chancellor of the UFS.
 
Mr Jack and Mr Chia-Chao Wu, Managing Director of Empowerdex, will be appointed as visiting professors in the UFS School of Management as part of the joint venture.
 
“The joint venture entails the establishment of a transformation office within the Centre for Business Dynamics at the UFS which will administer training programmes and conduct contract research on BEE as well as the establishment of a verification agency within the UFS School of Management,” said Mr Danie Jacobs, Head of the Centre for Business Dynamics at the UFS.
 
“The verification agency within the UFS School of Management will be able to verify the BEE compliance of businesses in the Free State and Northern Cape,” said Mr Jacobs.
 
According to Mr Jacobs, the venture originates from the Department of Trade and Industry’s (DTI) directive to draft codes of good practice for businesses as stated in the Broad Based Black Empowerment Act 53 of 2003. The final codes will be announced shortly and will act as a standard framework for the measurement of broad based BEE across all sectors of the economy.
 
The codes comprise seven elements on which basis points are allocated to a business to determine its level of compliance to BEE. 
 
“The UFS is the only tertiary institution in the country which offers a formal certificate whereby BEE practitioners can be trained in order to ensure that they are competent to measure BEE,” said Mr Jacobs.
 
“Being able to utilise the UFS’ experience and expertise in the field of transformation is of great benefit to us and it will assist us in driving BEE in the country,” said Mr Jack. 
 
According to Mr Jack, the UFS is centrally situated, which will make it easy for BEE practitioners to access the appropriate training course to suit their needs. “The venture will have an impact not only on this region, but on the whole country as the extensive networks of both Empowerdex and the UFS will contribute to us reaching and training BEE practitioners,” said Mr Jack. 
 
The training programmes that will be offered by the transformation office within the UFS Centre for Business Dynamics are the Management Development Programme for BEE and Transformation, the Executive Credit Bearing Short Learning Programme and an online Non-Credit Bearing Short Learning Programme for BEE Specialists. 
 
“The expertise and knowledge that Empowerdex brings to the joint venture is invaluable. Empowerdex pioneered the empowerment methodology and has been actively involved in the drafting of broad based BEE legislation, regulations and transformation charters,” said Mr Jacobs.
 
Media release
Issued by: Lacea Loader
Media Representative
Tel:   (051) 401-2584
Cell: 083 645 2454
17 November 2006
 

Being empowered: Mr Vuyo Jack, Executive Chairman of BEE ratings agency Empowerdex, and Prof Frederick Fourie, Rector and Vice-Chancellor of the University of the Free State (UFS). Empowerdex and the UFS signed an agreement to train practitioners that will implement BEE across all sectors of the economy.

Economic and Management Sciences

Education

Health Sciences

The Humanities

Law

Natural and Agricultural Sciences

Theology and Religion

Open Distance Learning

Business School

We use cookies to make interactions with our websites and services easy and meaningful. To better understand how they are used, read more about the UFS cookie policy. By continuing to use this site you are giving us your consent to do this.

Accept