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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

Researcher finds ways to serve justice efficiently
2016-01-07

Description: Prof Monwabisi Ralarala  Tags: Prof Monwabisi Ralarala

Prof Monwabisi Ralarala tackled the serving of justice from a linguistic viewpoint.
Photo: Supplied

In 2012, local and international media was saturated with reports of the Eugène Terre’Blanche murder trial. At the judgment, Judge John Horn read a lengthy extensive document, of which three pages were dedicated to voicing his concern about how police officers distort statements in the process of translation. Considering the fact that statements are the entry points to the criminal justice system, Prof Monwabisi Ralarala’s attention was drawn to the negative impact such distortion had insofar as the administration of justice was concerned. Of the three PhD degrees conferred by the University of the Free State (UFS) Faculty of Humanities at the 2015 Summer Graduation, one was in Language Practice with Prof Ralarala’s name on it.

Prof Ralarala’s research interests in language rights, forensic linguistics, and translation studies led him to use the Terre’Blanche trial as the basis for his second PhD case study titled: Implications and explications of police translation of complainants' sworn statements: evidence lost in translation. The doctoral dissertation focused on police stations in the Xhosa-speaking community of Khayelitsha in Cape Town.

Language and the law

When the victim of a crime approaches the South African Police Services (SAPS), the requirements are that a sworn statement be taken. However, as a prerequisite, the narration needs to be translated into English.  “The process unfolds in this manner: the complainant or the person laying the charges speaks in a language that they understand, and then the police officers translate that information into English because English is still the de facto language of record,” explained Prof Ralarala.

In the process of translation, the original narrative is lost, and so is some of the evidence. “They [the statements] have to be packaged in a certain way, in the form of a summary. As a police officer, you have to discard all the original narrative and create another narrative which is in English,” added the Associate Professor and Institutional Language Coordinator at the Cape Peninsula University of Technology.

Evidence is the basis of any court case and, when it is translated by police officers who do not hold the credentials of professional translators, a problem inevitably arises.

Because police officers are not trained in translation, “Some of the statements are filled with distortions, changing of information all together. In some cases, one would come across a case which was initially an assault but then - through the change and transformation, re-narration, retelling of the story by someone else - it becomes a case of attempted murder.”

Considering that a statement determines a suspect’s fate, it becomes all the more important to ensure that accuracy is upheld.

His internal and external supervisors, Prof Kobus Marais and Prof Russel Kaschula from the UFS and Rhodes University respectively stated that his PhD work has been hailed as a gem by international scholars. “According to one international assessor, he has made an exceptional contribution to the humanities and social sciences in general and to the fields of linguistics and translation studies in particular.”

Reshaping the landscape

According to Prof Ralarala, there are huge gaps in the translated versions of statements which create a problem when a ruling is made. Some of the recommendations put forward in his dissertation to bridge that gap are:

• to review the language policy insofar as the criminal justice system is concerned. The languages we speak are official and constitutionally embraced, and they hold the same status as English, hence they need to be used in criminal justice processes;
• to revisit the constitution and review if the provisions made for the Nguni languages are implemented;
• to supplement paper and pen with technology such as tape recorders. Statements can be revisited in cases where a controversy arises;
• to deploy professional translators and interpreters at police stations;
• to design a manual for police officers which contains all the techniques on how a statement should be taken.
• to enforce constitutional  provisions in order to reinforce the language implementation plan in as far as African languages are concerned .

These recommendations serve to undo or eliminate any perceived injustices perpetuated and institutionalised by current linguistic and formal practices in South Africa's criminal justice system.

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