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Start saving and slash your tax bill

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

How does it work?

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

However, an individual’s overall contributions per tax year are limited to R36 000. Any contributions exceeding the annual cap will be taxed at 40%. Your clients will therefore have to manage their 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 client’s tax-free saving accounts, with all interest, dividends and capital gains, may over time exceed R500 000.

What about withdrawals?

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

Your client may withdraw money at any time, but legislation discourages unnecessary withdrawals: no amount withdrawn may be replaced. Every contribution by your client counts towards her annual allowance and brings her closer to the limit, even if she is only putting back money she 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, through which your clients can invest amounts from R500 per month.
  2. The second product is administered and Satrix Managers, giving your clients 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.

Your client will only be paying:

  • the financial advice fee, as agreed with you
  • the fund management fee, which varies from fund to fund
  • the platform administration fee, where relevant

How to open an account
Ready to start investing tax free? Why not let Smart Invest – our interactive investment platform – guide you to find the unit trust investment that’s right for you? Smart Invest is the partner you need to help you create an action plan for your goal, guiding you with tips along the way until you get there. Get started now.

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