Latest News Archive

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

Demystifying the two-pot retirement system

20 August 2025 | Story Dr Annelize Oosthuizen | Photo Supplied

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 Communication and Brand Management Department once again honoured for ground-breaking communication work

2016-04-29

Description: Martie en Leonie award Tags: Martie en Leonie award

The UFS was announced as winner in the internal communication category of the African Excellence Award after entering the B Safe Take Action campaign. The university also received a Gold Award at the 2016 PRISM Awards. Here are Martie Nortjé, Assistant Director: Communication and Brand Management, and Leonie Bolleurs, Assistant Director: Internal Communication, from the University of the Free State.
Photo: Hannes Pieterse

Within a week, the Department of Communication and Brand Management at the University of the Free State brought home two gold awards. In April this year, the department was announced as winner in the Internal Communication Category of the African Excellence Awards for the B Safe Take Action campaign. They also received Gold at the 2016 PRISM Awards for the KovsieGear entry.

PRISM Award for the UFS KovsieGear shop

Martie Nortjé, Assistant Director: Branding and Merchandise, attended the PRISM Award function in Johannesburg where she received the Gold award for the UFS KovsieGear shop for the best entry in the corporate communication category. This is the second consecutive year that the department received Gold at the PRISM Awards. Last year, the department received Gold for the B Safe Take Action campaign.

The idea for a university-owned shop was initiated in 2013. Launched in January 2014, KovsieGear is used to strengthen the brand and creating a sense of ownership among all stakeholders. The KovsieGear team is grateful for the continuous support of staff and students, as well as alumni.

The PRISM awards of the Public Relations Institute of Southern Africa (PRISA) are Africa’s most sought-after award in the public relations industry, and are presented to public relations and communication professionals who have incorporated strategy, creativity, and professionalism successfully into public relations and communication programmes and strategies, showcasing a successful public relations campaign.

African Excellence Award for B Safe Take Action Campaign

The B Safe Take Action campaign also received an award recently at a gala event hosted by the African Excellence Awards in Cape Town. Leonie Bolleurs, Project Manager of the B Safe Take Action campaign, received the award on behalf of the university.

It is of cardinal importance for the university that its students, staff, and assets are safe. Once again, this award demonstrates that the university is serious about the safety of its staff and students. This is especially so, since it is the objective of the campaign to develop a culture of safety awareness in students and staff alike.

The hosts of the African Excellence Awards are The Communication Director, the magazine for Corporate Communications and Public Relations (PR) in Europe, which enjoys worldwide distribution. According to Rudolf Hetzel, Chairman of the jury and publisher of The Communication Director, the African Excellence Awards are an opportunity for all those working in the field of PR and communications throughout Africa to come together, and honour ground-breaking communication campaigns and projects.

Quality work

“I am extremely proud of the Communication and Brand Management team for performing excellently once again in national and continental awards programmes. The awards are a good benchmark for the quality and standard of the work we produce,” said Lacea Loader, Director of the Department of Communication and Brand Management.

In the past two years, the department also received other awards for their work. This include:
-   UFS #FaceOfFacebook campaign received a Gold Quill Excellence Award from the International Association for Business Communicators (IABC), both internationally and in the Africa region.
-   B Safe Take Action campaign received a Gold Quill Merit Award from the IABC, both internationally and in the Africa region.
-   UFS #FaceOfFacebook campaign received a Bronze Stevie Award from the International Business Awards (IBA).
-   B Safe Take Action campaign received a Bronze Stevie Award from the IBA.
-    #UFStoday Facebook campaign received a Merit Award from Marketing Advancement Communication in Education (MACE).
-   The NSFAS awareness campaign received a Merit Award from MACE.

Back

Economic and Management Sciences

Education

Health Sciences

The Humanities

Law

Natural and Agricultural Sciences

Theology and Religion

Open Distance Learning

Business School

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