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Start Saving and Slash Your Tax Bill

8 November 2016

South Africans are not saving enough. In fact, Reserve Bank stats show a rapidly deteriorating savings culture. While we used to save on average 10% of our disposable income in the 1970s, this figure has now dropped to zero. That’s why the National Treasury has introduced tax-free savings accounts to reignite a savings culture. Designed to encourage long-term savings, while giving you access to your funds at any time, these accounts offer an excellent savings opportunity.

How does it work?

All the proceeds – dividends, interest and capital gains – will be tax-free.

However, your overall contributions per tax year will be limited to R30 000. Any contributions exceeding the annual cap will be taxed at 40%. You will therefore have to manage your overall annual contributions carefully to remain within the limit. Unused amounts may not be rolled over, so it’s a case of “use it, or lose it”. While a lifetime contribution limit of R500 000 applies, the total value of your tax-free saving accounts, with all interest, dividends and capital gains, may exceed R500 000 over time.

What about withdrawals?

Because contributions to a tax-free savings account will be with after-tax money, withdrawals will be tax-free.

You may withdraw money at any time, but legislation discourages unnecessary withdrawals: no amount withdrawn may be replaced. Every contribution you make counts towards your annual allowance and brings you closer to the limit, even if you are only putting back money you withdrew in that same year.

Choosing the right tax-free account

Sanlam Investments offers two transparent, flexible products with no charges if you stop or reduce your contributions.

  1. The first one is a unit trust product administered by Sanlam Collective Investments (RF) (Pty)Ltd, through which you can invest amounts from as little as R200 per month.
  2. The second product is administered and Satrix Managers (RF) (Pty) Ltd, giving you access to low-cost index tracking returns.

Both products offer all the flexibility of a unit trust. The first is for investors who prefer actively managed funds; the second is for those who prefer passive investments.

What about the fees?

The two products mentioned above charge no:

  • product administration fees
  • performance fees
  • exit fees
  • switching fees
  • account amendment fees

You will only be paying:

  • the financial advice fee, as agreed with your financial planner
  • the fund management fee, which varies from fund to fund
  • the platform administration fee, where relevant
Sanlam Life Insurance is a licensed financial service provider.
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