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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

Research contributes to improving quality of life for cancer patients
2016-11-21

Description: Inorganic Chemistry supervisors  Tags: Inorganic Chemistry supervisors

Inorganic Chemistry supervisors in the Radiopharmacy
Laboratory during the preparation of a typical complex
mixture to see how fast it reacts. Here are, from the left,
front: Dr Marietjie Schutte-Smith, Dr Alice Brink
(both scholars from the UFS Prestige
Scholar Programme), and Dr Truidie Venter (all three
are Thuthuka-funded researchers).
Back: Prof André Roodt and Dr Johan Venter.
Photo: Supplied

Imagine that you have been diagnosed with bone cancer and only have six months to live. You are in a wheelchair because the pain in your legs is so immense that you can’t walk anymore – similar to a mechanism eating your bones from the inside.

You are lucky though, since you could be injected with a drug to control the pain so effective that you will be able to get out of the wheelchair within a day-and-a-half and be able to walk again. Real-life incidents like these provide intense job satisfaction to Prof André Roodt, Head of Inorganic Chemistry at the University of the Free State (UFS). The research, which is conducted by the Inorganic Group at the UFS, contributes greatly to the availability of pain therapy that does not involve drugs, but improves the quality of life for cancer patients.

The research conducted by the Inorganic Group under the leadership of Prof Roodt, plays a major role in the clever design of model medicines to better detect and treat cancer.

The Department of Chemistry is one of approximately 10 institutions worldwide that conducts research on chemical mechanisms to identify and control cancer. “The fact that we are able to cooperate with the Departments of Nuclear Medicine and Medical Physics at the UFS, the Animal Research Centre, and other collaborators in South Africa and abroad, but especially the methodology we utilise to conduct research (studying the chemical manner in which drugs are absorbed in cancer as well as the time involved), enhances the possibility of making a contribution to cancer research,” says Prof Roodt.

Technique to detect cancer spots on bone
According to the professor, there are various ways of detecting cancer in the body. Cancer can, inter alia, be identified by analysing blood, X-rays (external) or through an internal technique where the patient is injected with a radioactive isotope.

Prof Roodt explains: “The doctor suspects that the patient has bone cancer and injects the person with a drug consisting of an isotope (only emits X-rays and does no damage to tissue) that is connected to a phosphonate (similar to those used for osteoporosis). Once the drug is injected, the isotope (Technetium-99m) moves to the spot on the bone where the cancer is located. The gamma rays in the isotope illuminate the area and the doctor can see exactly where treatment should be applied. The Technetium-99m has the same intensity gamma rays as normal X-rays and therefore operates the same as an internal X-ray supply.” With this technique, the doctor can see where the cancer spots are within a few hours.

The same technique can be used to identify inactive parts of the brain in Alzheimer patients, as well as areas of the heart where there is no blood supply or where the heart muscle is dead.

Therapeutic irradiation of cancer
For the treatment of pain connected with cancer, the isotope Rhenium-186 is injected. Similar to the manner in which the Technetium-99m phosphonate compound is ingested into the body, the Rhenium-186 phosphonate travels to the cancer spots. Patients thus receive therapeutic irradiation – a technique known as palliative therapy, which is excellent for treating pain. A dosage of this therapy usually lasts for about two months.

The therapy is, however, patient specific. The dosages should correspond with the occurrence and size of cancer spots in the patient’s body. First, the location of the cancer will be determined by means of a technetium scan. After that, the size of the area where the cancer occurs has to be determined. The dosage for addressing total pain distribution will be calculated according to these results.

Technique to detect cancer spots on soft tissue
Another technique to detect cancer as spots on bone or in soft tissue and organs throughout the body is by utilising a different type of irradiation, a so-called PET isotope. The Fluor-18 isotope is currently used widely, and in Pretoria a machine called a cyclotron was produced by Dr Gerdus Kemp, who is a former PhD graduate from the Inorganic Research Group. The F-18 is then hidden within a glucose molecule and a patient will be injected with the drug after being tranquillised and after the metabolism has been lowered considerably. The glucose, which is the ‘food' that cancer needs to grow, will then travel directly to the cancer area and the specific area where the cancer is located will thus be traced and ‘illuminated’ by the Fluor-18, which emits its own 'X-rays'.

In the late 80s, Prof Roodt did his own postdoctoral study on this research in the US. He started collaborating with the Department of Nuclear Medicine at the UFS in the early 90s, when he initiated testing for this research.

Through their research of more than 15 years, the Inorganic Group in the Department of Chemistry has made a major contribution to cancer research. Research on mechanisms for the detection of cancer, by designing new clever chemical agents, and the chemical ways in which these agents are taken up in the body, especially contributes to the development in terms of cancer therapy and imaging, and has been used by a number of hospitals in South Africa.

The future holds great promise
Prof Roodt and his team are already working on a bilateral study between the UFS and Kenya. It involves the linking of radio isotopes, as mentioned above, to known natural products (such as rooibos tea), which possess anti-cancer qualities.

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