Tax free savings account

• The Tax-Free Savings Account (TFSA) allows you to save without paying tax on realized capital gains, dividends, interest, or other income.
• You may choose to invest in a selection of unit trust funds, model portfolios and other investment portfolios.
• The maximum amount you can contribute each tax year to all TFSAs is currently R36 000, with a lifetime maximum limit of R500 000. The limits are set in legislation and can change from time to time.
• A TFSA is suitable for investors who wish to save for a long-term goal and not pay tax on their investment returns.
• The product is a popular option for many different types of investors looking to utilize their annual tax-free savings allowance.
• It is not suitable for investors who require regular access to their money.

Preservation Fund

• When members leave their employment, the money saved in an employer retirement fund becomes available.
• Members can preserve this money by transferring the proceeds of their pension or provident fund into a preservation fund or retirement annuity.
• A preservation fund is a tax-efficient investment vehicle designed for individuals who wish to preserve their retirement savings.
• A preservation fund is suitable for members who would still like to save and grow their retirement savings from their previous employer’s fund. This allows them to keep their retirement plan on track.
• Transferring the retirement proceeds into a retirement fund is tax free.
• The retirement savings are safe from creditors in a preservation fund and will be free of estate duty and executor’s fees in the event of death.
• This product is not intended for anyone who wishes to access their investment in the short to medium term, or for those who wish to invest in a mix of asset classes that are not compliant with the Regulation 28 limits applied to all retirement funds.

Endowment

• An endowment is an investment policy of insurance which allows you to save in a tax-efficient way for a medium- to long-term goal.
• The endowment is a pure investment product with no insurance attached to it.
• The policy allows you to appoint one or more life assureds. The policy will end on the death of the last surviving life assured and the value of the policy will be payable as a death benefit to the nominated beneficiaries (if appointed) or to the estate.
• The policyholder may choose to invest in a selection of investment portfolios that are made available for the policy.
• A policyholder may wish to invest in an Endowment Policy because:
  • It is useful for estate planning purposes as the nominated beneficiaries can receive the money from the investment immediately when the last life assured passes away, and there are no executors’ fees payable.
  • It can be an effective savings vehicle for taxpayers with marginal tax rates above 30%, since the tax payable in an endowment is at a flat rate of 30% for individuals and trusts with individual beneficiaries; and
  • Tax is paid over to SARS on behalf of the client. No tax certificates are provided to investors.
• This product is not suitable if:
  • Tax is the main driver for making the investment and the investors income is taxed at less than 30%, as they will be taxed more in an endowment; or
  • Investors need to make withdrawals from the investment more than once during the first five years as there is a restriction on the investment.

Sinking Fund

• A sinking fund is a long-term policy of insurance which allows legal entities to plan and save in a tax-efficient manner.
• The sinking fund is a pure investment product with no insurance attached to it.
• A sinking fund policy is like an endowment policy, but the key difference between an endowment and a sinking fund is that there is no life assured nominated on a sinking fund policy.
• The benefits of investing in the sinking fund policy are that: It is useful for estate planning purposes as the nominated beneficiaries can receive the money from the investment immediately when the last life assured passes away, and there are no executors’ fees payable.
• Because you do not appoint a life assured on the sinking fund policy there is no death benefit payable.

• The benefits of investing in the sinking fund policy are that:
  • It is not impacted by a life event like death, and the policy will continue until it is surrendered.
  • It can be an effective savings vehicle for taxpayers with marginal tax rates more than 28%, since the tax payable in a sinking fund is at a flat rate of 28% for companies; and
  • The tax is taken care of in the product, and you don’t have to worry about additional tax submissions. Any withdrawals taken are net of any tax.
• This product is not suitable for clients who need to make withdrawals from the investment more than once during the first five (5) years.

It’s never too early to start investing. In fact, I’d urge you to set aside some of your income to invest from the moment you start earning. It may seem inconsequential, but compound interest is one of the most powerful forces out there. Invest, and this force will slowly and steadily be working for you instead of against you.”
– ROBERTO FAUSTINO