Latest News Archive

Please select Category, Year, and then Month to display items
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

Student excels at international level with research in Inorganic Chemistry
2015-09-21


Carla Pretorius is currently conducting research in
Inorganic Chemistry at the St Petersburg University,
Russia.

Photo:Supplied

Carla Pretorius completed her PhD in Inorganic Chemistry recently, with a thesis entitled “Structural and Reactivity Study of Rhodium(I) Carbonyl Complexes as Model Nano Assemblies”, and has just received her results. The assessors were very impressed, and she will graduate at the next UFS Summer Graduation in December 2015.

She is currently conducting research in St Petersburg, Russia, by invitation. She is working in the group of Prof Vadim Kukushkin of the St Petersburg University, under a bilateral collaboration agreement between the groups of Prof Kukuskin (SPBU) and Prof André Roodt (Head of the Department of Chemistry at the UFS).

Her research involves the intermetallic rhodium-rhodium interactions for the formation of nano-wires and -plates, with applications in the micro-electronics industry, and potentially for harvesting sun energy. She was one of only three young South African scientists invited to attend the workshop “Hot Topics in Contemporary Crystallography” in Split in Croatia during 2014. More recently, she received the prize for best student poster presentation at the international symposium, Indaba 8 in Skukuza in the Kruger National Park, which was judged by an international panel.

Carla was also one of the few international PhD students invited to present a lecture at the 29th European Crystallographic Meeting (ECM29) in Rovinj, Croatia (23-28 August 2015; more than 1 000 delegates from 51 countries). As a result of this lecture, she has just received an invitation to start a collaborative project with a Polish research group at the European Synchrotron Research Facility (ESRF) in Grenoble, France.

According to Prof Roodt, the ESRF ID09B beam line is the only one of its kind in Europe designed for time-resolved Laue diffraction experiments. It has a time-resolution of up to one tenth of a nanosecond, after activation by a laser pulse 100 times shorter (one tenth of a nanosecond when compared to one second is the equivalent of one second compared to 300 years). The results from these experiments will broaden the knowledge on light-induced transformations of very short processes; for example, as in photochemical reactions associated with sun energy harvesting, and will assist in the development of better materials to capture these.

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