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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

NRF researcher addresses racial debates in classrooms
2017-03-24

Description: Dr Marthinus Conradie Tags: Dr Marthinus Conradie

Dr Marthinus Conradie, senior lecturer in the
Department of English, is one of 31 newly-rated National
Research Foundation researchers at the University of
the Free State.
Photo: Rulanzen Martin

Exploring numerous norms and assumptions that impede the investigation of racism and racial inequalities in university classrooms, was central to the scope of the research conducted by Dr Marthinus Conradie, a newly Y-rated National Research Foundation (NRF) researcher.

Support from various colleagues
He is one of 31 newly-rated researchers at the University of the Free State (UFS) and joins the 150 plus researchers at the university who have been rated by the NRF. Dr Conradie specialises in sociolinguistics and cultural studies in the UFS Department of English. “Most of the publications that earned the NRF rating are aimed to contributing a critical race theoretic angle to longstanding debates about how questions surrounding race and racism are raised in classroom contexts,” he said.

Dr Conradie says he is grateful for the support from his colleagues in the Department of English, as well as other members of the Faculty of the Humanities. “Although the NRF rating is assigned to a single person, it is undoubtedly the result of support from a wide range of colleagues, including co-authors Dr Susan Brokensha, Prof Angelique van Niekerk, and Dr Mariza Brooks, as well as our Head of Department, Prof Helene Strauss,” he said.

Should debate be free of emotion?
His ongoing research has not been assigned a title yet, as he and his co-author does not assign titles prior to drafting the final manuscript. “Most, but not all, of the publications included in my application to the NRF draw from discourse analysis of a Foucauldian branch, including discursive psychology,” Dr Conradie says. His research aims to suggest directions and methods for exploring issues about race, racism, and racial equality relating to classroom debates. One thread of this body of work deals with the assumption that classroom debates must exclude emotions. Squandering opportunities to investigate the nature and sources of the emotions provoked by critical literature, might obstruct the discussion of personal histories and experiences of discrimination. “Equally, the demand that educators should control conversations to avoid discomfort might prevent in-depth treatment of broader, structural inequalities that go beyond individual prejudice,” Dr Conradie said. A second stream of research speaks to media representations and cultural capital in advertising discourse. A key example examines the way art from European and American origins are used to imbue commercial brands with connotations of excellence and exclusivity, while references to Africa serve to invoke colonial images of unspoiled landscapes.

A hope to inspire further research
Dr Conradie is hopeful that fellow academics will refine and/or alter the methods he employed, and that they will expand, reinterpret, and challenge his findings with increasing relevance to contemporary concerns, such as the drive towards decolonisation. “When I initially launched the research project (with significant aid from highly accomplished co-authors), the catalogue of existing scholarly works lacked investigations along the particular avenues I aimed to address.”

Dr Conradie said that his future research projects will be shaped by the scholarly and wider social influences he looks to as signposts and from which he hopes to gain guidelines about specific issues in the South African society to which he can make a fruitful contribution.

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