SPONSORED FEATURE
INVESTORS
CAN BANK ON
tax-free savings
accounts
BY SHEREEN BOTHA,
HEAD DOMESTIC TREASURY,
TRANSACTIONAL BANKING,
SASFIN BANK
products is R50 000. Sasfin Bank will
introduce a TFSA product to clients in mid2015. Our personal service offering will
ensure that clients are able to make the
most of their TFSA.
What individuals should know about TFSA
regulations:
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FSPs are obliged to offer products which
are simple to understand and transparent.
If investors are not satisfied with their
current FSP offering, they are allowed to
transfer any portion of the value in the
TFSA to another service provider.
The FSP from whom the TFSA is
transferred must provide a certificate
to the investor containing the details of
the transfer.
Withdrawals from the TFSA will reduce
your lifetime limit of R500 000 by the
amount you withdraw.
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PHOTOGRAPH: BIGSTOCKPHOTO
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Individual investors are thrilled to welcome
the National Treasury’s introduction of
a tax-free savings account and Financial
Services Providers (FSPs) have been equally
enthusiastic in providing these offerings to
South Africans.
The tax-free savings account (TFSA) is
a new conversation in financial markets.
Banks and insurance companies are
promoting their tax-free savings account
products with the aim of growing existing
client portfolios and possibly developing a
new client base.
Saving contributions to the TFSA are
limited to R30 000 per annum and a lifetime
saving of R500 000 meaning that no person
may ever invest more than R500 000 into
a TFSA. The investor’s after-tax yield is,
however, only maximised closer to the
lifetime limit of the investment because
exemptions already exist on interest income.
Individuals under the age of 65 may earn
up to R23 800 in interest income without
paying any tax, whereas persons over 65
can earn up to R34 500. The interest income
exemption will no longer be increased in line
with inflation. Interest earned per annum
in TFSAs in excess of the above exemptions
will therefore benefit investors.
If investors don’t manage these accounts
effectively, their investments in TFSAs
will become part of a bank’s “lazy deposit”
pool (deposits that investors don’t actively
manage) thus becoming a bank’s most
appreciated liability. Since investments into
the TFSAs are limited up to R30 000 per
annum, it means that an investor may invest
less than R30 000 per annum. The big four
banks are advertising TFSAs with a minimum
deposit of as little as R50 up to R1000.
Sasfin Bank services an investment-savvy
client base who are able to make annual
contributions of R30 000. The minimum
investment for current investment deposit
Withdrawals from TFSA may only be
paid into an account held in the name of
the investor, i.e. no third-party payments
are allowed. Payments must be made
within 7 (seven) days of request.
Early withdrawal fees on guaranteed
returns are limited to the higher
amount of R300 or in accordance with
the following formula:
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Withdrawal amount multiplied
by the amount of days left to the
maturity date multiplied by the
current market rate with the same
term less the guaranteed return.
An investor may hold more than one
tax-free investment with one service
provider subject to the annual and
lifetime limits.
The take up of this initiative will depend on
the marketing strategies of the various
FSPs and even though the majority of
South African individuals may never realise
the full tax benefit of this initiative, the
psychology of paying no tax will motivate
the South African population to become a
“savings nation”.
JEWISH LIFE ■ ISSUE 83 47