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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.
UFS awarded R3,6-million to train court interpreters
2008-05-15
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At the training session for court interpreters that took place on the Main Campus of the UFS in Bloemfontein recently are, from the left, front: Ms Zandile Mtolo, Pietermaritzburg, Ms Lindiwe Gamede, Bethlehem; back: Mr Sipho Majombozi, Port Shepstone, Prof. Lotriet, and Mr Mzi Nombewu, Upington. The four learners are working at their respective magistrates courts.
Photo: Lacea Loader |
UFS awarded R3,6-million to train court interpreters
A contract to the value of R3,6-million has been awarded to the University of the Free State (UFS) to train court interpreters throughout South Africa.
The contract was awarded to the Department of Afro-asiatic Studies, Sign Language and Language Practice at the UFS by the Safety and Security Sector Education and Training Authority (SASSETA).
“We are the only tertiary institution in the country that offers a national diploma in court interpreting. It provides a unique opportunity to court interpreters to be trained by a group of eight lecturers who are experts in the field,” says Prof. Annelie Lotriet, associate professor at the Department of Afro-asiatic Studies, Sign Language and Language Practice.
Prof. Lotriet is an internationally renowned interpreting expert who was also responsible for the training of interpreters for the former Truth and Reconciliation Commission.
According to Prof. Lotriet no co-ordinated training programmes for court interpreters existed and there was also no control over the training processes. The programme, initiated by the Department of Justice and Constitutional Development, is managed by the SASSETA. “It is the first time that the Department of Justice and Constitutional Development initiates such an extensive training programme for court interpreters,” says Prof. Lotriet.
The group of 100 court interpreters on the programme are from all over the country. Of the group, ten are unemployed learners who interpret for the Department of Justice and Constitutional Development on an ad-hoc basis.
The programme, which stretches over two years, comprises of theoretical and service training. Contact sessions take place in Bloemfontein, Pretoria and Cape Town, four times a year for two weeks at a time. The second contact session for Bloemfontein was recently completed.
“Learners are nominated by their regional offices. The programme consists of interpreting theory, interpreting practice and basic law subjects. The training material is developed and written by the SASSETA and facilitated and presented by the UFS. The learners interpret in all the 11 languages. Some of them can speak a couple of languages each,” says Prof. Lotriet.
“Everything is going very well with the programme and we are receiving a lot of positive feedback from the learners. This first group is an experiment and it depends on their success whether the Department of Justice and Constitutional Development will expand the programme,” says Prof. Lotriet.
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
15 May 2008
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