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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

Mushrooms, from gourmet food for humans to fodder for animals
2016-12-19

Description: Mushroom research photo 2 Tags: Mushroom research photo 2 

From the UFS Department of Microbial Biochemical and
Food Biotechnology are, from left: Prof Bennie Viljoen,
researcher,
MSc student Christie van der Berg,
and PhD student Christopher Rothman
Photo: Anja Aucamp

Mushrooms have so many medicinal applications that humans have a substance in hand to promote long healthy lives. And it is not only humans who benefit from these macrofungi growing mostly in dark spaces.

“The substrate applied for growing the mushrooms can be used as animal fodder. Keeping all the medicinal values intact, these are transferred to feed goats as a supplement to their daily diet,” said Prof Bennie Viljoen, researcher in the Department of Microbial, Biochemical and Food Biotechnology at the UFS.

Curiosity and a humble start
“The entire mushroom project started two years ago as a sideline of curiosity to grow edible gourmet mushrooms for my own consumption. I was also intrigued by a friend who ate these mushrooms in their dried form to support his immune system, claiming he never gets sick. The sideline quickly changed when we discovered the interesting world of mushrooms and postgraduate students became involved.

“Since these humble beginnings we have rapidly expanded with the financial help of the Technology Transfer Office to a small enterprise with zero waste,” said Prof Viljoen. The research group also has many collaborators in the industry with full support from a nutraceutical company, an animal feed company and a mushroom growers’ association.

Prof Viljoen and his team’s mushroom research has various aspects.

Growing the tastiest edible mushrooms possible
“We are growing gourmet mushrooms on agricultural waste under controlled environmental conditions to achieve the tastiest edible mushrooms possible. This group of mushrooms is comprised of the King, Pink, Golden, Grey, Blue and Brown Oysters. Other than the research results we have obtained, this part is mainly governed by the postgraduate students running it as a business with the intention to share in the profit from excess mushrooms because they lack research bursaries. The mushrooms are sold to restaurants and food markets at weekends,” said Prof Viljoen.

Description: Mushroom research photo 1 Tags: Mushroom research photo 1 

Photo: Anja Aucamp

Natural alternative for the treatment of various ailments
“The second entity of research encompasses the growth and application of medicinal mushrooms. Throughout history, mushrooms have been used as a natural alternative for the treatment of various ailments. Nowadays, macrofungi are known to be a source of bioactive compounds of medicinal value. These include prevention or alleviation of heart disease, inhibition of platelet aggregation, reduction of blood glucose levels, reduction of blood cholesterol and the prevention or alleviation of infections caused by bacterial, viral, fungal and parasitic pathogens. All of these properties can be enjoyed by capsulation of liquid concentrates or dried powdered mushrooms, as we recently confirmed by trial efforts which are defined as mushroom nutriceuticals,” he said.

Their research focuses on six different medicinal genera, each with specific medicinal attributes:
1.    Maitake: the most dominant property exhibited by this specific mushroom is the reduction of blood pressure as well as cholesterol. Other medicinal properties include anticancer, antidiabetic and immunomodulating while it may also improve the health of HIV patients.
2.    The Turkey Tail mushroom is known for its activity against various tumours and viruses as well as its antioxidant properties.
3.    Shiitake mushrooms have antioxidant properties and are capable of lowering blood serum cholesterol (BSC). The mushroom produces a water-soluble polysaccharide, lentinan, considered to be responsible for anticancer, antimicrobial and antitumour properties.
4.    The Grey Oyster mushroom has medicinal properties such as anticholesterol, antidiabetic, antimicrobial, antioxidant, antitumour and immunomodulatory properties.
5.    Recently there has been an increased interest in the Lion’s Mane mushroom which contains nerve growth factors (NGF) and may be applied as a possible treatment of Alzheimer’s disease as this compound seems to have the ability to re-grow and rebuild myelin by stimulating neurons.
6.    Reishi mushrooms are considered to be the mushrooms with the most medicinal properties due to their enhancing health effects such as treatment of cancer, as well as increasing longevity, resistance and recovery from diseases.


Description: Mushroom research photo 3 Tags: Mushroom research photo 3


Valuable entity for the agricultural sector
Another research focus is the bio-mushroom application phenome, to break down trees growing as encroaching plants. This research is potentially very valuable for the agricultural sector in the areas where Acacia is an encroaching problem. With this process, waste products are upgraded to a usable state. “It is therefore, possible to convert woody biomass with a low digestibility and limited availability of nutrients into high-quality animal fodder. By carefully selecting the right combination of fungus species to ferment agro-wastes, a whole host of advantages could become inherently part of the substrate. Mushrooms could become a biotechnological tool used to ‘inject’ the substrate that will be fed to animals with nutrition and/or medicine as the need and situation dictates,” said Prof Viljoen.

 

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