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20 August 2025
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Story Dr Annelize Oosthuizen
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Photo Supplied
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.
Guidelines for diminishing the possible impact of power interruptions on academic activities at the UFS
2008-01-31
The Executive Management of the UFS resolved to attempt to manage the possible impact of power interruptions on teaching and learning proactively. Our greatest challenge is to adapt to what we cannot control at present and, as far as possible, refrain from compromising the quality of teaching and learning at the UFS.
First the following realities are important:
- There is no clarity regarding the period of disruption. It is possible that it may last for a few months to approximately five years.
- At present Eskom (as well as Centlec) is not giving any guarantees that the scheduled interruptions will be adhered to. It comes down to this that the power supply may be interrupted without notice, but can also be switched back on in an unpredictable manner.
- Certain scheduled teaching-learning activities/classes, etc. may (initially) be affected very negatively, as the UFS is working according to a scheduled weekly module timetable at present.
- During the day certain venues with natural lighting and ventilation may remain suitable for contact sessions, while towards evening venues will no longer be suitable for the presentation of classes.
- Lecturers will have to fall back on tried and tested presentation methods not linked to electricity, without neglecting innovative technology-linked presentation methods, or will have to schedule alternative teaching-learning activities for lost teaching-learning time.
Against the background of the above-mentioned realities, we secondly request you to comply with the following guidelines as far as possible:
- In addition to your module work programme, develop an alternative programme (which can, for example, among others, consist of additional lectures or a more rapid work rate) in which provision is made for a loss of at least two weeks’ class/contact time during the semester. Consult Centlec’s schedule of foreseen power interruptions for this planning.
- Should it appear that your class(es) will probably be disrupted seriously by the scheduled power interruptions, you should contact your dean for possible rescheduling of your timeslot and a supplementary timetable. A prescheduled supplementary timetable for Friday afternoons and Saturdays and/or other suitable times will be compiled for this purpose in co-operation with faculties.
- The principle of equivalent educational treatment of day and evening lectures must be maintained at all times. Great sensitivity must be shown by, for instance, not only rescheduling the lectures of evening students - given specifically the sensitivity regarding language and the distribution of day and evening lectures.
- In the case of full-time undergraduate courses, no lectures should be cancelled beforehand, even when a power interruption is announced, as power interruptions sometimes do not take place or are of shorter duration than announced. If the power supply is interrupted, it should not be accepted that it will remain off and that subsequent lectures will not take place. Should a power interruption occur in a venue, lecturers and students must wait for at least ten minutes before the lecture is cancelled. Should natural lighting and ventilation make it possible to continue with the lecture, it should be done.
- Our point of departure is that no student must be able to use the power interruptions and non-presentation/cancellation of lectures as an argument for having failed modules, for poor academic performance or to negotiate for a change of examination scheduling.
Thirdly we wish to make suggestions regarding teaching and learning strategies (which can be especially useful in case of a power interruption).
- Emphasise a greater measure of self-activity (self-initiative) on the part of students in this unpredictable environment right from the start.
- Also emphasise the completion of assessment assignments in good time, so that students cannot use power interruptions as an excuse for late submission. Flexibility will, however, have to be maintained.
- Place your PowerPoint presentations and any other supplementary learning materials on the web.
- Use the opportunity to stimulate buzz groups, group work, panel discussions and peer evaluation.
Please also feel free to consult Dr Saretha Brussow, Head: Teaching, Learning and Assessment Division at the Centre for Higher Education Studies and Development, about alternative teaching, learning and assessment strategies. Phone extension x2448 or send an email to sbrussow.rd@ufs.ac.za .
Thank you for your friendly co-operation!
Prof. D. Hay