Latest News Archive

Please select Category, Year, and then Month to display items
Previous Archive
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

Dean of Law appointed for second term as acting judge in the Free State High Court
2017-02-17

Description: Prof Nicholson  Tags: Prof Nicholson

Prof Caroline Nicholson, Dean of the Faculty of Law

The Dean of the Faculty of Law, Prof Caroline Nicholson, has been re-appointed by the Judge President of the Free State High Court, Judge Mahube Molemela, to serve a full term in 2017 as an acting judge. This will be her second term, as she served in the same position in early 2016, and it is such, a testament to her outstanding work. Her re-appointment is a source of pride not only to the University of the Free State, but the city of Bloemfontein, and the region as a whole.

Since taking up the position of Dean in 2015, Prof Nicholson has demonstrated exceptional leadership, and continues to take great strides in developing the Faculty’s internal and external programmes. “I am delighted that the University has facilitated my taking advantage of this opportunity. During this term, I will be exposed to a diversity of legal matters both civil and criminal, some of which I was not exposed to during my previous acting period. The exposure to the practical aspects of the law from the perspective of the Bench will inform my decisions regarding curriculum review and development, at a time when the faculty is actively engaged in ensuring that curriculum content is both relevant and context-appropriate,” said Prof Nicholson.

She adds that her appointment as acting judge will strengthen the Faculty’s positive relationship with the legal profession and, especially with the Bench. It will also benefit the Faculty, its staff and students.  In 2015, the Faculty partnered with the International Association of Women Judges (Free State Chapter), to host a dinner, which will be hosted again this month. The association brought to the fore new ventures into the involvement of women judges in an advisory capacity and sharing of expertise. In 2016, members of the association began to enact this role.

Judge Molemela and Judge Azhar Cachalia of the Supreme Court of Appeal accepted appointments to the Advisory Board of the Free State Centre for Human Rights. Judge Khalipi “Jake” Moloi of the Free State High Court in Bloemfontein, gave trial advocacy tips to teachers, coaching the Schools Moot Court Competition. Prof Nicholson said: “It is hoped that more opportunities will arise to increase interaction between students and the judiciary, both are eager for this to happen. I am also learning a great deal and am once again enjoying the collegial and supportive environment that my colleagues create at the High Court.”

Prof Nicholson holds an LLD from University of South Africa, and has published several research articles in accredited journals, with a special interest in Family Law and children’s rights.

We use cookies to make interactions with our websites and services easy and meaningful. To better understand how they are used, read more about the UFS cookie policy. By continuing to use this site you are giving us your consent to do this.

Accept