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20 August 2025
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Story Dr Annelize Oosthuizen
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Photo Supplied
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.
UFS hosts tenth SASRIM conference filled with highlights
2016-08-23
A new OSM book entitled Musics of the Free State:
Reflections on a Musical Past, Present and Future
will be launched on 25 August 2016 as part of the
South African Society for Research in Music’s
conference, hosted by the UFS.
Photo: Supplied
Bridging the gap between music thinking and music making. This is one of many aims of the South African Society for Research in Music (SASRIM), whose 2016 annual conference will be hosted by the Odeion School of Music (OSM) at the University of the Free State (UFS). It marks the tenth anniversary of SASRIM and the congress, from 25 to 27 August 2016, features many highlights. This includes the Arnold van Wyk Centenary Gala Concert and the launch of the OSM book Musics of the Free State: Reflections on a Musical Past, Present and Future. Keynote speakers will be Stephanus Muller from Stellenbosch University and Guthrie Ramsey from the University of Pennsylvania.
Society encourages multiple facets of music research
Research forms a crucial part of music and therefore SASRIM looks at perspectives on thinking and performing the boundary between music thinking and music making. The society also encourages the submission of a wide variety of proposals, including those exploring alternative formats, multiple facets of music research and practice on the African continent, and disciplinary intersections. Contributions that reflect on the first decade of the society’s existence or any aspect related to Van Wyk are especially welcome.
New OSM book receives sterling international review
“Musics of the Free State is a nuanced and
richly endowed study of musical practices in
South Africa, which deserves the international
dissemination it will now receive”.
“It will deeply repay close reading far beyond Bloemfontein.” That was some of the praise that Musics of the Free State received from Prof Harry White from the University of Dublin in the International Review of the Aesthetics and Sociology of Music 47 (1). According to him the book, edited by Prof Martina Viljoen from the OSM, “is a nuanced and richly endowed study of musical practices in South Africa, which deserves the international dissemination it will now receive”.
The book will be launched on 25 August 2016 in the Odeion foyer after the Arnold van Wyk Centenary Gala Concert.
Gala concert commemorate celebrated SA composer
The gala concert on 25 August 2016 at 18:00 will be recited by OSM staff members and the OSM Camerata in the Odeion Auditorium. The programme for a special concert, presented in collaboration with Fine Music, has been curated to celebrate the centenary of the birth of South African composer, Arnold van Wyk. Tickets are available at Computicket or at the door.
The concert, which will also serve as the annual OSM Dean’s concert, will be broadcasted live by Fine Music Radio.
See the following links:
More information about SASRIM 2016.
To listen to the broadcast of the Arnold van Wyk Centenary Gala Concert (then click the button to listen live).
A complete review by Prof White on Musics of the Free State will be available soon.
Copies of Musics of the Free State can be purchased from the OSM at OSM@ufs.ac.za.