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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 in mathematics ranks among world’s top peer reviewers
2016-10-07

Description: Abdon Peer Review Tags: Abdon Peer Review

Prof Abdon Atangana, from the UFS Institute
for Groundwater Studies.
Photo: Johan Roux

Thirty-year-old Prof Abdon Atangana has received the prestigious Sentinels of Science Award 2016. This award honours the highest achievers in peer review across the world’s journals. The elite contributors to scholarly peer review and editorial pursuits internationally are also honoured with this award. Recipients have demonstrated an outstanding, expert commitment to protecting the integrity and accuracy of published research in their field.

Prof Atangana, who ranks number one in the mathematics discipline with a merit of 324, is a professor at the Institute for Groundwater Studies at the University of the Free State (UFS).

He is editor of 17 international journals, editor-in-chief of two international journals and also reviewer of more than 200 international accredited journals. He has been lead and guest editor of some special issues. He is also editor of 19 journals of applied mathematics and mathematics and has presented and participated in more than 20 international conferences.

Prof Atangana’s research interests are methods and applications of partial and ordinary differential equations, fractional differential equations, perturbations methods, asymptotic methods, iterative methods, and groundwater modelling.

“Editors in more than 100 journals
trust my opinion to assess
whether a submitted paper
can be published or not.”

Peer review requires a respected expert in a given field

According to the professor, reviewers play a central role in scholarly publishing. “In the academic field, peer review is the process of subjecting an author’s scholarly work, research, or ideas to the scrutiny of others who are experts in the same field, before a paper describing this work is published in a journal or as a book. The peer review process helps the publisher to decide whether the work should be accepted, considered acceptable with revisions, or rejected.

“Peer review requires a respected expert in a given field, who is qualified and able to perform the review in a given timeframe. Due to the impact of my research papers in the field of mathematics and applied mathematics, and also my international recognition in the field of applied mathematics, many editors in more than 100 journals of applied mathematics trust my opinion to assess whether a submitted paper in a given journal of mathematics and applied mathematics can be published or not. Only this year I was able to review more than 100 papers from different journals of applied mathematics, applied physics, mathematics, engineering and hydrology,” he said.

A successful peer reviewer displays passion for the development of science

Key to his success as peer reviewer is his passion for the development of science, his ability to write fair reports about a given manuscript, as well as his knowledge on what has been done and what are the challenges in a given field to be able to give a report that will help the advancement of science.

Currently he is developing new mathematics tools that will be used to accurately model statistical problems as well as physical problems with many layers.

“To be the number one peer reviewer in the world in mathematics is a product of love, patience and determination to enhance science,” Prof Atangana said.

His advice to young researchers is to put their trust in God and to work hard. “Not necessarily for money but for love because the future of Africa is in the hands of young Africans,” he said.

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