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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

Chemistry research group receives international recognition
2016-10-28

Description: Chemistry research group  Tags: Chemistry research group

Dr Carla Pretorius mounts microcrystals with
Dumisani Kama while Pennie Mokolokolo
observe the technique.
Photo: Supplied


Crystals and crystallography form an integrated part of our daily lives, from bones and teeth, to medicines and viruses, new catalysts, jewellery, colour pigments, chocolates, analysing rocks on the moon and Mars, electronics, batteries, metal blades in airplane turbines, panels for solar energy and many more.

In spite of this, not many people know much about X-ray crystallography, although it is probably one of the greatest innovations of the 20th century, spanning the sciences. That is why this discipline is actively researched by a number of tertiary institutions around the globe as well as the Inorganic Chemistry Group of the Department of Chemistry at the University of the Free State (UFS).

Research by the Inorganic Chemistry Group includes:
•    clever design of model medicines to better detect cancer and study heart, bone and brain defects;
•    production of new compounds for making new and better automobile fuels and decrease carbon dioxide in the atmosphere;
•    generation and purification of new South African mineral resources for metals widely used in turbines which use wind energy.

A group of UFS students have received acknowledgement for their research at six international venues in the past few months.

Posters in Cameroon
Twelve postgraduate students, together with Prof André Roodt, Head of the Inorganic Chemistry division at the UFS, delivered three oral presentations, nine posters, one plenary and one keynote lecture abroad.

Four UFS students - Nina Morogoa, Pheello Nkoe, Alebel Bilay, and Mohammed Elmakki - who delivered posters at the First Pan African Conference on Crystallography in Dschang, Cameroon, received prizes for their presentations.

School and conference in Croatia

Students Orbett Alexander and Dumisani Kama were selected to attend the intense and demanding Third European Crystallographic School in Bôl, Croatia. Both Kama, Alexander and Prof Roodt gave oral presentations at the 24th Croatian-Slovenian Crystallographic Meeting at Brac Island, Croatia.

Kama, together with Dr Ferdi Groenewald, Dr Carla Pretorius and Pennie Mokolokolo, also attended the European Synchrotron Radiation Facility (ESRF) in Grenoble, France. The ESRF is a centre of excellence for fundamental and innovation-driven research. The storage ring at this laser facility can generate X-rays 100 billion times brighter than typical medical and laboratory X-ray sources.

Research in Switzerland

Kama and Mokolokolo also spent one month on research visits at the University of Zurich in Switzerland. Both Kama and Alexander were invited to present their research orally to the Institute of Inorganic Chemistry in Zurich, headed by Prof Roger Alberto.

In Basel, Switzerland, Dr Ferdi Groenewald, Dr Renier Koen, and Dr Truidie Venter all presented their research at the 30th European Crystallographic Meeting.

Prof Roodt said: “It is incredibly important that our postgraduate students get the chance to interact, discuss, and be taught by the best in the world and realise that hard work on basic and applied chemistry processes leads to broader recognition. The delegates to these international venues came from more than 60 countries and took note of our students work. With these young researchers, our future at the UFS and at Inorganic Chemistry is in good hands”.

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