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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.
Fighting the tuberculosis battle as a collective
2015-09-28
The team hard at work making South Africa a
healthier place |
Tuberculosis (TB) is second only to HIV/AIDS as the greatest killer worldwide due to a single infectious agent. More than 95% of TB deaths occur in low- and middle-income countries. Despite being more prevalent among men than women, TB remains one of the top five causes of death amongst women between the ages of 15 and 44 years. While everyone is at risk for contracting TB, those most at risk include children under the age of five and the elderly. In addition, research indicates that individuals with compromised immune systems, household contacts with pulmonary TB patients, and healthcare workers are also at increased risk for contracting TB.
According to the Deputy Director of the Centre for Health Systems Research and Development (CHSR&D) at the UFS, Dr Michelle Engelbrecht, research has found that healthcare workers may be three times more likely to be infected by TB than the general population.
The unsettling fact
“Research done in health facilities in South Africa has found that nurses do not often participate in basic prevention acts, such as opening windows and wearing respirators when attending to infectious TB patients,” she explained.
In response to this concern, CHSR&D, which operates within the Faculty of Humanities at the the University of the Free State (UFS) Bloemfontein Campus has developed a research project to investigate TB prevention and infection control in primary healthcare facilities and households in Mangaung Metropolitan.
Action to counter the statistics
A team of four researchers and eight field workers from CHSR&D are in the process of gathering baseline data from the 41 primary healthcare facilities in Mangaung. The baseline comprises a facility assessment conducted with the TB nurse, and observations at each of the facilities. Individual interviews are also conducted with community caregivers, as well as TB and general patients. Self-administered questionnaires on knowledge, attitudes, and practices about TB infection control are completed by all nurses and facility-based community caregivers.
Healthcare workers are the main focus of this research, given their increased risk of acquiring TB in healthcare settings. At clinics, interventions will be developed to improve infection control practices by both healthcare workers and patients. TB patients’ households are also visited to screen household contacts for TB. Those found to have symptoms suggesting TB infection are referred to the clinics for further assessment and treatment.
The findings of this study will serve to inform the development of an intervention to address TB prevention and infection control in primary healthcare facilities. Further funding will be sought to implement and evaluate the intervention.
Curbing future infections and subsequent deaths as a result of TB is the priority for the UFS. The cooperation and collaboration of the community, government, and sponsors will ensure that this project is a success, hence prolonging life expectancy.