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

Farmers need to plan grazing better, says UFS expert
2017-02-21

Description: Prof HO de Waal Tags: Prof HO de Waal

Prof HO de Waal, affiliated researcher
at the University of the Free State,
says farmers should save grazing
during the summer months to have
fodder available in the winter and
early spring.
Photo: Theuns Botha,
Landbouweekblad

“Farmers should save veld during the summer months to have grazing available for animals especially in the winter and early spring. Farmers should also adjust livestock numbers timely and wisely according to the available material in the field,” says Prof HO de Waal, professional animal scientist and affiliated researcher in the Department of Animal, Wildlife and Grassland Sciences at the University of the Free State.

He offered this advice as a result of the sporadic and scattered (scant) rainfall of the past couple of summers. “In retrospect we know that this kind of precipitation started in about 2014 and has continued in subsequent summers. In February 2015, it was clear that a major fodder scarcity was developing.”

Existing research methods serve as source of current knowledge
Dr Herman Fouché (Agricultural Research Council) has conducted research on the impact of climate, especially rainfall, on the growth of grass. Sophisticated computer technology developed as far back as the 1980s to – through modelling – predicts the impact of climate on field production during the growing season.

The impact of climate, and more specifically rainfall, on field production has been known to animal and grazing scientists for a long time. Prof De Waal used the modelling results to determine the impact of rainfall on grass as a feeding source for animals.

“Information that emerged from this old research programme could therefore be applied directly to animal production,” says Prof De Waal.

Adjust livestock numbers to availability of grazing
In the summer rainfall areas of South Africa, grass usually grows from the end of August and early September. The growth process is dependent on the transfer of soil moisture, as well as on rainfall during the winter and early spring.

“Livestock numbers should be balanced throughout the year (according to the nutritional needs and production of the animals) with the availability of grazing material – be consistent, not only during certain seasons or when drought is imminent,” is Prof De Waal’s advice to farmers. “Farmers are also encouraged to carefully reduce the number of livestock on grazing and to rather focus their attention and limited resources on the remaining breeding herds (cows and ewes).”

“It is tragic, but unfortunately many farmers will not survive the effects of recent years. Similar climatic conditions will occur, with the same tragic consequences for man and beast. Better planning has to start now.” The assistance of private institutions, individuals, as well as the government, during the severe droughts is gratefully acknowledged.

Spineless cactus pear as solution for scarcity of animal feed
Prof De Waal says spineless cactus pears could be used as a feeding source during droughts. “The effects of a severe drought, or major animal-feed scarcity, are still prevalent in large parts of the subcontinent.” This may act as a catalyst to utilise spineless cactus pears as a feeding source and to be incorporated in the feed-flow programme for livestock on natural grazing.

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