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

SA and Indonesia strengthen educational ties
2016-05-19

Description: Embassy of Indonesia  Tags: Embassy of Indonesia

From the left were Prof Hussein Solomon, Senior Professor at the Department of Political Studies and Governance; Professor Ikrar Nusa Bhakti, Research Professor of the Indonesian Institute of Sciences; Suprapto Martosetomo, ambassador of the Embassy of Indonesia to South Africa; and Prof Theodor Neethling, Head of the Department of Political Studies and Governance.
Photo: Johan Roux

“Indonesia and South Africa share one common trait which is diversity,” were the opening remarks of Suprapto Martosetomo, ambassador of the Embassy of Indonesia to South Africa. The ambassador drew parallels between the two republics at a public lecture hosted by the Department of Political Studies and Governance at the University of the Free State Bloemfontein Campus on 10 May 2016.

Professor Ikrar Nusa Bhakti, Research Professor in the Indonesian Institute of Sciences, presented the lecture on “Managing Political Diversities: The Indonesian Experience.” He outlined the history of Indonesia’s political and economic development, political system, and government’s policy in dealing with political and economic challenges, as well as the lessons learned from its experience.

Diversity and governance
As is South Africa, Indonesia is a ‘rainbow nation’. Being the largest country in the Southeast Asia, it boasts a population of approximately 250 million people, 300 ethnic groups, and 650 local languages. However, despite such diversity, the nation has been united behind the motto of “unity in diversity”, which was adopted when Indonesia proclaimed its independence in 1945.

Indonesia and SA also bear similarities in terms of a multiparty parliamentary system. Their current Joko Widodo and our Jacob Zuma administrations are governed by policies including anti-corruption, economic prosperity, equity and equality, quality education and healthcare, and maintenance of security.

International relations
The two countries have a long-standing relationship since 1955 when the Asia-Africa conference was held in Bandung, Indonesia. The conference represented solidarity against colonisation.

Prof Hussein Solomon, Senior Professor at the UFS Department of Political Studies and Governance, attributes Indonesia’s success as a product of education and leadership - something South Africa could learn from..“Indonesia like SA has been struggling with how to balance social diversity, democracy, and a political system. Despite this, they have managed to develop a functioning democracy and a vibrant economy. They are one of the top 20 economies in the world, and by the year 2035 will be in the top seven economies in the world, according to the Goldman Sachs, report,” he said.

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