National Treasury has treated South Africa by introducing the Tax-Free Savings Accounts (TFSA). These can boost up your investment planning if you use them correctly. PWH Wealth Group has researched what’s on offer by various product providers.
The products focus on suitability and transparency, TFSA is only available to individual South African ID holders. TFSA’s can be utilized via certain endowments, linked investment products, most savings accounts, unit trusts and exchange traded funds.
The product applies no tax (Capital Gains Tax, Income Tax on Interest nor Dividends Tax.)
Contributions are R30 000 per annum to a maximum of R500 000 over a life time, which equates to 16.6 years of tax free investing, with no regulations stated on penalties for early withdrawals (this would be product dependant). Contributions above the prescribed premiums will be taxed at 40%.
TFSA’s may not be ceded or used as any form of security, nor may ownership be transferred at death. On certain products beneficiaries may be nominated for proceeds.
What are the opportunities?
Annual contribution of R12 500
Interest at 7%
Tax bracket 30%
Full R500 000 invested
Basic Savings Plan: At age 65 = Approx. R1 500 000
Tax-Free Savings Account: At age 65 = Approx. R2 750 000
Minimums range from R350pm to the full R30 000pa, this being a great opportunity to save for children’s school fees, holidays and retirement or a change in life. Product provider (Platforms) Fees range from 1.25% down to 0.75%. Asset management fees will vary depending on your choice of fund. One specific product provider will reduce your product provider fee by 30% if you choice to invest in their internal funds.
The fund choices range from Exchange Traded Funds (ETF’s) to High Equity. You can further reduce the costs by selecting ETF’s (or market tracking funds). Important to note that no funds are allowed to charge performance fees.
Investing early allows for maximum long term growth with the effects of compounded interest. At PWH Wealth Group, we encourage you to take up this opportunity and let us assist you in packaging the right solution for your needs which fits in with your personal financial goals.
For more information, please contact the PWH Wealth Group office on 011 214 0880