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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

Dr Francois Deacon appears in international film, Last of the Longnecks, due to research on giraffes
2017-04-04

Description: Giraffe research read more  Tags: Giraffe research read more

Dr Francois Deacon was invited by the producer of Last
of the Longnecks
to be part of a panel handling a question-
and-answer-session about the film.
Photo: Supplied

A great honour was bestowed on a researcher at the University of the Free State (UFS) when he was invited to the preview of the documentary film, Last of the Longnecks. Dr Francois Deacon, lecturer and researcher in the Department of Animal, Wildlife and Grassland Sciences at the UFS, who also has a role in the film, attended the preview at the Carnegie Institution for Science’s Smithsonian National Museum in Washington DC, in the US, in March this year. The preview formed part of the DC Environmental Film Festival.

The Environmental Film Festival in the US capital is the world’s leading showcase of films with an environmental theme and which aims to improve the public’s understanding of the environment through the power of film. During the festival, the largest such festival in the US, more than 150 films were shown to an audience of 30 000 plus. 

Dr Deacon was invited by the producer of Last of the Longnecks to be part of a panel handling a question-and-answer-session about the film directly after the show. He described it as the greatest moment of his life. 

Role in the film Last of the Longnecks

“My role in the film was as the researcher studying giraffes in their natural habitat in order to understand them better, so that we may better protect them, and be able to provide better education on the problem in Africa,” says Dr Deacon. 

“Together with Prof Nico Smit, also from the UFS Department of Animal, Wildlife and Grassland Sciences, Hennie Butler from the Department of Zoology, and Martin Haupt from Africa Wildlife Tracking, we were the first researchers in the world to equip giraffes with GPS collars and to conduct research on this initiative,” he says. This ground-breaking research has attracted international media attention to Dr Deacon and Prof Smit. 

“Satellite tracking is proving to be extremely valuable in the wildlife environment. The unit is based on a mobile global two-way communication platform, utilising two-way data satellite communication, complete with GPS systems.

“It allows us to track animals day and night, while we monitor their movements remotely from a computer over a period of a few years. These systems make the efficient control and monitoring of wildlife in all weather conditions and in near-to-real time possible. We can even communicate with the animals, calling up their positions or changing the tracking schedules,” says Dr Deacon.

The collars, which have been designed to follow giraffes, enable researchers to obtain and apply highly accurate data in order to conduct research. Data can be analysed to determine territory, distribution or habitat preference for any particular species.

Over a period of three years (2014-2016), the Last of the Longnecks team from Iniosante LLC captured on film how Dr Deacon and his team used the GPS collars in Africa to collect data and conduct research on the animals.

“With our research, which aims to understand why giraffes are becoming extinct in Africa, we are looking at the animal in its habitat but not only the animal on its own. If the habitat of these animals is lost, they will be lost as well. Therefore, our focus is on conservation and better understanding the habitat. The giraffe is only a tool to better understand the habitat problem,” says Dr Deacon. 

Since the beginning of his research Dr Deacon and his team have had six new collar designs, with animals in four different reserves being equipped with the collars. The collars use the best technology available in the world and make it possible to determine how giraffes communicate over long distances, and how their sleep patterns function. Physiological and biological focus is placed on the giraffe’s stress levels, natural hormone cycles, and milk quality in cows. 

Description: Giraffe 2017 Tags: Giraffe 2017

Photo: Supplied

Experience at the film festival

“Absolutely amazing. Totally beyond our frame of reference as South Africans.” This is how Dr Deacon describes his experience of the three days in Washington DC during the film festival.

“It was an absolute honour to be part of the global preview of the film and to be able to work with Ashley Davison, the director of the film, and his team. I am just a rural farm boy who dreams big, and now this dream is known worldwide!” he says. 

The film, which will be launched in April, will be screened in South Africa on the National Geographic channel in May 2017. Meanwhile, the film will also be shown at eight other film festivals in the US. 

Work will start on a follow-up documentary in October and Dr Deacon is excited about the prospect. A mobile X-ray machine will be available from October. Internal sonars could also be performed on each of the animals. Researchers from around the world will form part of the team which will be led and co-ordinated by Dr Deacon and his co-workers at the UFS.

Former articles: 

18 Nov 2016: http://www.ufs.ac.za/templates/news-archive-item?news=7964 
23 August 2016: http://www.ufs.ac.za/templates/news-archive-item?news=7856 
9 March 2016:Giraffe research broadcast on National Geographic channel
18 Sept 2015 Researchers reach out across continents in giraffe research
29 May 2015: Researchers international leaders in satellite tracking in the wildlife environment

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