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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

Reclassification of giraffe status pivotal in public action, says UFS researcher
2016-12-08

Description: Reclassification of giraffe status  Tags: Reclassification of giraffe status  

Dr Francois Deacon, specialised researcher
in the Department of Animal, Wildlife, and
Grassland Sciences at the University of the Free State.
Photo: Supplied

Great news for those who care about the conservation of giraffes is today’s (8 December 2016) announcement by the International Union for the Conservation of Nature (IUCN) that giraffes are now classified as ‘Vulnerable’. The species, formerly classified as ‘Least Concern’ on the IUCN Red List — an index on the likelihood of extinction of animals worldwide — is threatened with extinction.

“Until recently, few people were aware of the situation facing giraffes. It is time to show the world giraffe numbers are in danger. This reclassification by the IUCN is pivotal to get the public to stand up and take action for giraffes,” said Dr Francois Deacon, specialised researcher in the Department of Animal, Wildlife, and Grassland Sciences at the University of the Free State (UFS).

Research is essential to develop effective conservation plans for a species

Key to this announcement was the status report submitted by Dr Deacon. He was the lead author responsible for the submission of the Southern African Giraffe subspecies (Giraffa camelopardalis giraffa) status report that was part of the larger species report submitted for review by the (IUCN). The UFS has been doing many research projects in the past couple of years on giraffe-related issues and topics to address this problem.

The UFS is one of only a few universities in Africa that is committed to studying giraffes to ensure the conservation of this species for generations to come.

“The reclassification of giraffes to ‘Vulnerable’
status, by the IUCN, is pivotal to get the public
to stand up and take action for giraffes.”

A 40% decline in the giraffe population over the past two decades is proof that the longnecks are officially in trouble. According to Dr Deacon, this rate of decline is faster than that of the elephant or rhino. The main reasons for the devastating decline are habitat loss, civil unrest and illegal hunting.

Dr Deacon, pioneer in the use of GPS technology to study giraffes and their natural habitat, said “This vulnerability clearly stipulates we are quickly losing grip on our last few natural populations”. He and a team of researchers at the UFS in South Africa are leading various research and conservation projects to help save the last remaining giraffes in Africa.

Giraffes moved from ‘least concern’ to ‘vulnerable’ on the Red List

The IUCN, a health check for our planet, is the highest level at which decision-makers can prove how many species (fauna or flora) are surviving or not. The update from ‘Least Concern’ to ‘Vulnerable’ on the Red List was released at the 13th Conference of the Parties to the Convention on Biological Diversity in Cancun, Mexico.

A wildlife documentary, Last of the Longnecks clearly shows how the number of giraffes has plummeted in the past two decades from 154 000 to fewer than 98 000 today — with numbers of some giraffes, such as Kenya’s reticulated giraffe, declining by as much as 80%.  

Any individual or institution that wants to make a contribution relating to giraffe research can contact Dr Deacon at the UFS on deaconf@ufs.ac.za.

 

In other media:

Announcement on BBC news: http://www.bbc.co.uk/news/science-environment-38240760
Time: http://time.com/3622344/giraffe-extinction/
The Telegraph: http://www.telegraph.co.uk/science/2016/12/08/giraffes-now-facing-extinction-warn-conservationists/
ABC News: http://abcnews.go.com/International/giraffes-danger-extinction-numbers-dropped/story?id=27334959
theguardian: https://www.theguardian.com/environment/2016/dec/08/giraffe-red-list-vulnerable-species-extinction
Aol: http://www.aol.co.uk/news/2016/12/07/giraffes-in-danger-of-extinction-as-population-plunges-by-up-to/  

 

Former articles:

18 November 2016: Studies to reveal correlation between terrain, energy use, and giraffe locomotion
23 August 2016:
Research on locomotion of giraffes valuable for conservation of this species
9 March 2016:
Giraffe research broadcast on National Geographic channel
18 September 2015:
Researchers reach out across continents in giraffe research
29 May 2015:
Researchers international leaders in satellite tracking in the wildlife environment

 



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