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

Khayalami residence launches first in-house library
2016-04-21

Description: 2016 KL News Khayalami library  Tags: Khayalami residence launches first in-house library in the country
Bongani Mtotoba (left) and Sinoxolo Gcilitshana (right) at the first-ever 24 hour in-house library at Khayalami residence. The librarian and Deputy Residence Head respectively hope to revive the culture of reading on our Bloemfontein Campus.
Photo: Valentino Ndaba

“It is said that reading means to the brain what exercise means to the body. For that reason, we want to bring back the culture of reading to our students who are, after all, the future replacement of the leadership of our wounded and broken country,” said Sinoxolo Gcilitshana, Deputy Residence Head, and Prime of Khayalami.

Titles such as A Life Ever Lasting by Miranda Hearn, To Live Free by William Wilberforce, Powers of Darkness Powers of Light by John Cornwell, and Character Counts by Charles Dyer are among the 228 inspirational books on the shelves of Khayalami residence’s library. Tuesday 12 April 2016 was a proud moment for the residence as it launched the first library in the country located within a university residence on the Bloemfontein Campus of the University of the Free State.

Last year, Dimpho Jasa, a resident at Khayalami, approached Sinoxolo, who then held the Residence Committee (RC): Academics portfolio, with an idea of forming a book club. Sinoxolo had suggested that a library be established in order to make the book club sustainable. That conversation served as a foundation of the 24 hour in-house library.

“We started with five books last year,” said Sinoxolo, “and ever since we sent the message out, the Vice-Chancellor and Rector, Prof Jonathan Jansen has been supporting us together with the Vice-Rector, Prof Nicky Morgan, as well as the Dean of the Faculty of Education, Prof Sechaba Mahlomaholo, and the Head of the Department of English, Prof Helene Strauss.”  

Now, more than 170 young men have access to a growing library that is expected to hold 1500 books by September, when Sinoxolo steps down as the Prime. According to Bongani Mtotoba, the RC: Academics and librarian, some residents have made pledges to help expand the collection. “The response has been quite positive from the guys,” he said.

Borrowers are required to submit a book review upon returning the book. This feedback will be compiled by the English Department into a book available to the public.

Khayalami’s pioneering spirit has also seen the residence run a successful writing competition in 2015. It has since been introduced to the rest of the East College, and now will take place annually.  

For more information on how to donate books or enter the writing completion, contact Sinoxolo on 0783332203 or semsinoxolo@hotmail.com.

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