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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

Parking at UFS for visitors
2007-11-10

UFS creates more parking for visitors

In its effort to make it easier for visitors to park on the Main Campus of the University of the Free State (UFS) in Bloemfontein, two paid parking areas will be put into operation as from Monday, 5 November 2007.

These parking areas are part of a comprehensive new parking strategy of the UFS, which is being implemented since September 2007. As part of the strategy, areas of the central campus have been reserved for staff and visitors and hundreds of new parking areas were developed for students at the entrance in Wynand Mouton Avenue (at the Faculty of Health Sciences) and the entrance in DF Malherbe Avenue (at the Agriculture Building).

“The paid parking areas for visitors, which are as close as possible to the busy and largely closed-off central campus, were created as an additional service to visitors,” said Ms Edma Pelzer, Director of Physical Resources at the UFS.

According to Ms Pelzer, persons who attend meetings, seminars or short courses, visiting colleagues, consultants, service providers, family of students and staff members, clients, etc. can make use of this parking.

“We have found that it is often difficult for visitors to obtain parking in or close to the central campus. Now they will have a choice to either park in the visitors parking areas at a minimal fee or to park in any of the open unreserved parking areas on campus,” said Ms Pelzer.

The areas, which will be closed off behind booms on weekdays from 06:00 until 18:00, are situated to the eastern side of the “Red Square”, east of the CR Swart and Idalia Loots Buildings and west of Campus Avenue North between the Psychology and the Flippie Groenewoud Buildings.


Media Release
Issued by: Lacea Loader
Assistant Director: Media Liaison
Tel: 051 401 2584
Cell: 083 645 2454
E-mail: loaderl.stg@ufs.ac.za  
2 November 2007

Parking for visitors: Important notice:

As from Monday 5 November 2007 two paid parking areas on the UFS Campus will be put into operation. The areas will be closed off behind booms on weekdays from 06:00 until 18:00. These will be manned and R3 per hour will be charged.
 

The following areas are involved:

  • P3: The area to the east of the “Red Square”, east of the CR Swart and Idalia Loots Buildings.

     
  • P6: The area to the east of Campus Avenue North between the Psychology and Flippie Groenewoud Buildings.

    The friendly co-operation of users of motor vehicles on campus is requested to allow this implementation to proceed as smoothly as possible.

Parking for visitors: More information

The strategy to create paid parking areas for visitors

The decision to reserve areas in the central campus areas for the convenience of visitors was taken as part of the comprehensive new parking strategy of the UFS approved by the Executive Management in May 2007 and which is being implemented since September.

All visitors need not park in these areas. Visitors may park for free on any open (unreserved) parking bay on campus. These paid parking areas for visitors, as close as possible to the busy and largely closed-off central campus, have been created as an additional service to visitors.

The strategy to close off parts of the central campus for staff members and visitors was implemented after sufficient alternative parking areas had been developed for students.

What is meant by the term “visitors”?

It includes all persons who are not students of staff members of the UFS and who visit the campus for one reason or another. Persons who attend meetings, seminars or short courses, visiting colleagues, consultants, service providers, family of students and staff members, et cetera are included.

As at present, it will, of course, be possible to make special arrangements with Protection Services to make it possible for VIP visitors to park as near as possible to their destinations.

No student or staff member will be actively prevented from parking in the area. They will, however, be discouraged by the fact that R3 per hour will be charged without exception.

The visitors’ parking area and access to it

  • P3: The area to the east of the “Red Square”, east of the CR Swart and Idalia Loots Buildings. The area is within easy walking distance for visitors to, among others, the following buildings: George du Toit Administration Building, Theology Building, Idalia Loots Building, CR Swart Building, Johannes Brill Building, Van der Merwe Scholz Hall.

    The area is conveniently accessible from the following entrances: Nelson Mandela Drive, Groenewoud Street and Wynand Mouton Drive.

     
  • P6: The area to the west of Campus Avenue North, between the Psychology and Flippie Groenewoud Buildings. The area is within easy walking distance for visitors to all the academic buildings in the central campus, such as the Chemistry Building, Stef Coetzee Building, the Geography Building, et cetera and located directly opposite the general information point on the Thakaneng Bridge.

    The area is conveniently accessible from the following entrances: Fürstenburg Road and DF Malherbe Avenue (at the Agriculture Building).

     

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