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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

UFS Department of Physics offers unique learning experience with on-campus radio telescope
2015-12-14

Athanasius Ramaila, an Honours student in the Department of Physics, and Dr Brian van Soelen, a lecturer from the same department, in the laboratory where the radio telescope is housed in the new wing of the Physics Building on the Bloemfontein Campus of the UFS. The telescope will be used to expose graduate students to the basic techniques of radio astronomy.
Photo: Charl Devenish

The university this year added a four-storey wing to the existing Physics Building on the Bloemfontein Campus. The new development, which includes four lecture halls and four laboratories, complements other world-class facilities such as the X-ray photoelectron spectroscope and the scanning electron microscope.

A unique asset that distinguishes the UFS Department of Physics from other similar institutions, is the Boyden Observatory situated approximately 27 km northeast of Bloemfontein. The observatory houses a powerful 1.5 m optical telescope, and several smaller, but well equipped telescopes.

According to Pieter Meintjes, Professor in the Department of Physics, the observatory has acquired a new addition - a 0.5 m optical telescope donated by the South African Astronomical Observatory (SAAO) and the National Research Foundation (NRF) to the UFS Astrophysics Group. This optical telescope is one of two powerful optical telescopes used to introduce students to techniques such as photometry and spectroscopy.

“The telescope at Boyden forms an integral part of the Department of Physic’s student training and research programme. Because the UFS is the only university in South Africa operating such a facility, and one of only a few globally, Astrophysics students at the UFS have the unique privilege of having unrestricted access to these telescopes for their MSc and PhD studies,” says Prof Meintjes. In addition, the department has also built a radio telescope as part of a post-graduate student project. The telescope, housed in the new wing of the Physics Building at the Bloemfontein Campus of the UFS, will be used to expose graduate students to the basic techniques of radio astronomy, especially in light of the fact that the SKA is nascent. Prof Meintjes would like to act proactively by grounding his students in the relevant techniques of radio astronomy. The telescope will be used to introduce students to the manner in which radio flux calibrations are performed in order to determine the energy output of an emitting source.

At undergraduate level, the radio telescope will be used, together with optical telescopes in the Astrophysics laboratory, to place students at a high baseline regarding the level of multi-wavelength astrophysics training received at the UFS.

Third-year and Honours students will also have the opportunity of practical training in a research laboratory with 15 computers. The laboratory is equipped with software used to reduce and analyse multi-wavelength data.

“My goal is for the UFS to become the major centre of multi-wavelength astrophysics in South Africa and a key role player in the international arena. To be able to do this, our training should be world class,” Prof Meintjes said.

Aided by its world-class facilities and research, the Department of Physics is competing with the best in the world. Research-wise, a group from the Department of Physics is intensively involved with the SKA Project (Square Kilometre Array), with 3 000 dishes reaching from Carnavon in the Karoo to Mauritius in the Indian Ocean. According to Prof Meintjes, many detailed studies can be conducted with the SKA system of sources, showing major eruptions and mass effluent from the systems. Athanasius Ramaila, a BSc Honours student in Astrophysics at the UFS, has also received a two-year SKA internship, where he will be engaged in the SKA software engineering programme to help with developing software for the telescope.

The UFS Astrophysics Group is focusing on the multi-wavelength study of high-energy astrophysics sources. “This multi-wavelength approach to astrophysics is in line with the recent announcement by government that multi wavelength astrophysics will be the main focus for astrophysics research in South Africa. It is also a very important focus for research in the international arena, as can be seen from the large number of international conferences having a multi-wavelength character,” Prof Meintjes said.


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