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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

Financial and registration information for UFS students (including international students)
2017-02-22


Update: 7 February 2017


The management of the University of the Free State (UFS)
is aware of a misleading post on social media this
past weekend.

The correct facts are:

1) In December 2016, the UFS received information of a
total allocation of R189 239 000 from the National Student
Financial Aid Scheme (NSFAS) for 2017.

2) NSFAS provisionally funded 453 first-time entering
students in January 2017.

3) During 2016, 3 868 students received NSFAS funding.
Should these students qualify according to the academic
requirements of NSFAS, they will qualify to receive the
same funding again in 2017. In the meantime, due to the
current backlog at NSFAS, the UFS assisted 2 573 of
these students who qualify for funding academically.
This will enable the students to register for 2017 while
waiting for NSFAS to make the necessary allocations.
Information as on 6 February 2017 indicated that 2 330
of these students already made use of the opportunity
and have registered for 2017.

4) On 6 February 2017, the UFS received communication
from NSFAS regarding an additional amount of
R66 513 252 which is available for first-time
entering students. Approximately 875 students
will benefit from this allocation. Financial Aid will soon
finalise this process and successful students will be
notified of the allocations.

5) The UFS is in the process of resolving the
classification of the quintile schools so that more
students could be assisted.

The above-mentioned is not final and will change
on a daily basis.

There is an understandable and shared concern among students of the University of the Free State (UFS) around the cost of higher education. This has been a topic of discussion not only on national level, but it has also been a priority for the university’s senior leadership in discussions with student leaders.

The following are ways in which students receive assistance to register for the 2017 academic year:

1.    Students receiving assistance from the National Student Financial Aid Scheme (NSFAS)

1.1    Senior students

1.    Senior students who received NSFAS assistance in 2016.

a.    This group of students will receive a NSFAS allocation in 2017, subject to the following terms and conditions:
i.    If they satisfied the 50% module pass requirement for the 2016 academic year.
ii.    If they satisfied the n+2 completion requirement.

b.    Students who conform to these requirements can register as from 31 January 2017.
c.    These students’ placement in residences can also be confirmed.
d.    These students will receive an allocation for books and meals subject to the prioritisation as prescribed by NSFAS.

2.    Senior students who received confirmation of a NSFAS allocation in 2017 with outstanding debt of not more than R20 000.

a.    These students must please visit the Student Finance desk in the different registration venues to make acceptable arrangements for payment of the outstanding monies.
b.    Acceptable arrangements refer to the payment of 50% of these outstanding monies by 30 June 2017 and the remainder by 31 October 2017.
c.    These students will be allowed to continue with their registration after the above process has been complied with.
d.    These students’ placement in residences can also be confirmed.
e.    These students will receive an allocation for books and meals subject to the prioritisation as prescribed by NSFAS.

3.    Senior students who applied for NSFAS assistance in 2017 for the first time or applied previously, but did not meet the qualifying criteria, may only register with the assistance of a NSFAS allocation once confirmed by NSFAS. In the absence thereof, these students may only register after payment of the required prepayments for full registration, or they may register provisionally.

1.2     First-time entering students
The university’s Department of Finance is dealing with this group collectively based on the confirmed financial assistance by NSFAS for the group as a whole.

1.    First-time entering students to whom an allocation have been confirmed by NSFAS will receive an allocation and will be able to continue with their registration. Their placement in residences can also be confirmed. They will receive an allocation for books and meals subject to the prioritisation as prescribed by NSFAS.

2.    First-time entering students who applied at NSFAS before the cut-off dates and matriculated at schools in the quintile 1 to 3 categories will be allowed to register on providing proof of submission of their application. Their placement in residences can also be confirmed. They will receive an allocation for books and meals subject to the prioritisation as prescribed by NSFAS. Confirmation of the students who matriculated at schools in the quintiles 1 to 3 (as per the data collected with the assistance of the university’s ICT Services) will serve as sufficient evidence of the NSFAS allocation still to be made to them.

3.    First-time entering students who can provide proof that the family income is dependent on a grant from the South African Social Security Agency (SASSA)  has also been confirmed to receive a NSFAS allocation.  Their placement in residences can also be confirmed. They will receive an allocation for books and meals subject to the prioritisation as prescribed by NSFAS.

4.    Please note that the above process only caters for applicants who applied in time and who are admitted in programmes for 2017.

1.3 NSFAS prescriptions towards the allocation of funds

NSFAS determined a priority order that must be used to distribute the NSFAS allocation. The priority order is as follows:

1.    Tuition fees
2.    Books
3.    Accommodation
4.    Meals
5.    Travel

The amount awarded must be allocated according to the above priority order until it is depleted. It thus means that all tuition fees must first be paid before an allocation may be made for books, accommodation, meals, and travel.

NSFAS also prescribes that no allowance may be paid until the student has signed his or her contract. Due to the backlog with allocations to students by NSFAS, contracts for these allocations are also not made available yet.

The UFS is fully aware of the predicament the above circumstances create for students with regard to the allocations for books and meals. To assist students as a transitional arrangement, the university took it upon itself to advance an amount of R750 for meals to all registered NSFAS recipients. This advancement will be paid by the students’ NSFAS allocation after they have signed the contract. All other payments, as per the priority order, can unfortunately only be made after students signed the NSFAS contracts. Signing of contracts will be done electronically.  

The advance for meals has been available since Monday 6 February 2017. Students  are reminded that they must be registered before the amount of R750 may be advanced. Students should visit the Financial Aid Offices for enquiries.

Students are requested to support the effort of the UFS by availing themselves to sign contracts as soon as it becomes available.

Students should also note that all universities were informed this week of the backlogs that has developed at NSFAS in the processing of financial aid applications made by first-time entering students and returning students. NSFAS is giving urgent attention to the matter. The UFS is monitoring the progress closely and will communicate with the affected students, if necessary.

2.    Senior students with outstanding debt who do not receive NSFAS funding

Students may register provisionally, subject to the following terms and conditions approved by the UFS Council on 2 December 2016.

1.    Students must be South African citizens. (International students may not register provisionally because of the Immigration Act.)
2.    Students must have been previously registered at the UFS.
3.    Students must be enrolled for full-time studies and must attend lectures on one of the three campuses (open-learning students, e-learning students, and students registered with Varsity College do not qualify for provisional registration).  
4.    Outstanding balances on an applicant’s tuition fees account for 2016 must be less than R20 000.

The minimum pre-payment to register provisionally in 2017 is:
R1 900 for non-residential students; and
R6 750 for residential students.

3.    Department of Higher Education Fees Adjustment Grant for 2017

The Department of Higher Education and Training will pay the fee increase capped at 8% for all qualifying registered students with a gross combined family income of up to R600 000 per annum in 2017. This is a grant and will not have to be repaid by qualifying students. The grant will only cover tuition fees and accommodation provided by universities. Students who are recipients of bursaries and scholarships that cover their full cost of study will have to pay the percentage fee adjustment.

The following students qualify:

1.    Only South African citizens and citizens with permanent South African residence studying towards an undergraduate or postgraduate qualification in 2017.
2.    The applicant and direct family (mother, father, spouse or legal guardians) must have a GROSS combined family income of R600 000 or less per annum before tax deductions.

The following students will not have to apply for the grant as they will automatically be considered:

1.    Applicants who applied for NSFAS funding.
2.    All students who attended quintile 1, 2, and 3 schools in Grade 12.

All other students will have to apply for the fee adjustment grant. The application form is available on www.ufs.ac.za. Incomplete applications will not be considered. More information can be obtained from the Financial Aid Office.

Students who are unsuccessful in their application may appeal within 14 days of the outcome of the decision by completing an appeal form which will also be available on the university's website at http://www.ufs.ac.za/kovsielife/unlisted-pages/bursaries/financial-aid.

The closing date for applications is 15 February 2017.

4.    International students

The prepayments for 2017 as approved by the UFS Council on 2 December 2016 are:
1.    Non-resident students: R28 160
2.    Resident students: R43 160

The following concessions were made to assist international students to meet the financial requirements for 2017 as approved by the UFS Council on 2 December 2016:

1.    Students who are unable to pay the full amount must visit Student Finance in registration venues.
2.    All outstanding monies of the previous year must be paid in full.

3.    The prepayment amount for 2017 will be calculated for each student based on the following:
a.    A minimum payment of R12 820 for non-resident students and R22 725 for resident students is payable before registration can be considered.
b.    A quotation will be prepared based on the academic advice for 2017.
c.    A payment agreement for the balance of the pre-payment or the first semester’s fees is signed by the student.
d.    This amount is payable not later than 31 March 2017.
e.    The registration of these students are subject to the on-time payment of the agreed amounts.    
The current position of the Department of Home Affairs is that all students who have pending applications should be allowed to register on condition that they produce their study visas by 31 March 2017 (Refer to the Minister’s Dispensation Immigration Directive 26 of 2016).

International students may apply for an emergency travel document at their respective Embassies/Consulates, as this will allow for cross-border travelling and will give the student an opportunity to register on site.

Students should bring or email a copy of their receipts as proof that they have applied for their study visa and a certified copy of their passport (issued by the South African Embassy or Consulate), confirmation of their medical aid (a SA medical aid registered under the SA Medical Schemes Act 131 of 1998). Students will have up until 31 March to submit their study visas to Mrs Niemann at the Office for International Affairs, located in the Mabaleng A Building on the Bloemfontein Campus; email: niemannaja@ufs.ac.za. Failure of which will result in deregistration of students.

Zimbabwe: Because Zimbabwe no longer issues emergency travel documents,  students from Zimbabwe must email a certified copy of their passport and receipt (issued by the South African Embassy or Consulate), and confirmation letter of the medical aid to Ms Jeanne Niemann from the Office for International Affairs on the following email address: niemannaja@ufs.ac.za. In doing so, students will be able to register online provided that their finances and their admission requirements are in order.

International students should note that the blanket concession was only for final-year students that could not complete their studies due to exams being written at the beginning of the next academic year.  If a student returned home in December 2016, this concession expired and the student had to re-apply for a study visa or apply for a visitor’s visa. The relaxed requirements will apply only to final-year students who were not meant to return and continue studies in 2017.

Please see the following explanation of the Blanket Concession:

CLARIFICATION – BLANKET STUDY VISA EXTENSION TO 31 MARCH 2017

Circular 31 of 2016 has reference.

The International Education Association of South Africa (IEASA) has brought to our attention that there may be some confusion regarding the blanket administrative extension to 31 March 2017 of study visas with an expiry date of or prior to 31 December 2016 granted by the Department of Home Affairs in Immigration Directive No. 25 of 2016.

The Department of Home Affairs has confirmed that the Directive does not serve as a replacement visa for students travelling home in December 2016. This Directive serves as an extension of current visas for students who need to complete their academic programmes in 2017. The DHA has advised that should any final-year students be travelling to their home countries in December 2016, they would need to return in January 2017 with a visitor’s visa.

5.    Enquiries

Bloemfontein and South Campuses:

Undergraduate and honours students: +27 51 401 3003 / 2806 / 9090 / 9670 / 2817 / 9669

Postgraduate students (Master’s and Doctoral): +27 51 401 9537

Refunds: +27 51 401 7050

Student cards (meals and books): +27 51 401 2799 / 3337

Collections: +27 51 401 3643 / 3448; Fax: +27 51 401 3579

Email: tuitionfees@ufs.ac.za  

Qwaqwa Campus:

Client Services: +27 58 718 5024 / 5119 / 5262

Student cards (meals and books): +27 58 718 5026

Cashiers: 058 718 5028; Fax: +27 58 718 5118

Email: nchapiem@qwa.ufs.ac.za

International Office:  

+27 51 401 3219

 

Released by:
Lacea Loader (Director: Communication and Brand Management)
Telephone: +27 51 401 2584 | +27 83 645 2454
Email: news@ufs.ac.za | loaderl@ufs.ac.za
Fax: +27 51 444 6393















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