Registered users can save articles to their personal articles list. Login here or sign up here

Tax-free savings accounts with equity exposure

Some investment options – updated.

JOHANNESBURG – What are my options if I want to invest in a tax-free savings account with equity exposure?

Some Moneyweb readers may have pondered this question – especially those who would like to use tax-free savings accounts as a long-term investment vehicle. The inclusion of growth assets (like equity and listed property) in these accounts could also be important to outperform inflation in the long run. 

From March 1 this year, individual investors can invest up to R30 000 a year in tax-free savings accounts. While the capital investment will be capped at R500 000 over your lifetime, all proceeds earned (interest, dividends and capital growth) will be 100% tax-free.

This article provides more information on the products available with some kind of equity exposure (unit trusts, index-trackers and ETFs). It does not include cash and bonds-only products, retail savings bonds or products offered by long-term insurers. Although it is fairly comprehensive, it is not exhaustive and there will be product providers that aren’t listed here.

The article does not constitute advice or a recommendation and is meant as a reference point to start your own research. Consult your financial advisor about the options available that best suit your needs. Also keep in mind that the fees listed may not be all-inclusive or directly comparable between providers. Fees could differ depending on the medium used to access the products or the type of savings vehicle. 

Below is a list of product providers and a summary of their plans in alphabetical order.

Allan Gray

Allan Gray has no plans to offer tax-free savings accounts at this stage.

Coronation

Coronation will introduce a tax-free savings account as soon as it has clarified the eligibility criteria for underlying investments with National Treasury.

How long this consultation process will last is unclear, but it hopes to be in a position to introduce tax-free accounts before the end of 2015.

Discovery Invest

Craig Sher, head of product development, says all Discovery unit trusts and a full range of external unit trusts will be offered.

Depending on the chosen funds, asset class exposure will include everything from equity to global stocks, fixed interest, property and cash.

Sher says the fees and minimum monthly investment still have to be finalised. Retail investors can start to invest from mid-April.

More information will be available at www.discovery.co.za from mid-March.

Investec Asset Management 

Daryll Welsh, head of product at Investec Investment Management Services (IMS), says Investec’s platform (IMS) will offer a tax-free savings account, which will allow access to a range of unit trust funds and ETFs.

“The tax-free savings account will be offered alongside our other iSelect products, which charge an annual fee of 0.4% on the first R3 million invested and 0.2% per annum on amounts thereafter,” Welsh says. 

No initial product fees or exit fees are applicable.

Welsh says investors with other investments on the platform such as a retirement annuity or preservation fund will receive the benefit of these assets in calculating the applicable fee. In other words, the total value of all of the investments will be taken into account when determining the fee.

The minimum monthly investment will be R500.

“We anticipate taking the product live at the end of May,” Welsh says.

Information will be made available via www.investecassetmanagement.com

Investment Solutions

Investment Solutions will be offering the Real Return Focus Unit Trust and the Institutional Equity Fund. Both portfolios are multi-managed (by a variety of asset managers). 

The Real Return Focus unit trust will invest in equity, property, bonds, cash and commodities while the Institutional Equity Fund will invest in equity, property, cash and commodities.

 

 

Real Return Focus Unit Trust

Institutional Equity Fund

Investment fee

1.19% p.a.

1.45% p.a.

Minimum monthly investment

R500

R500

More information is available at www.investmentsolutions.com

MitonOptimal 

Fund name

IP Defended Beta Fund

IP Active Beta Fund

IP Foreign Flexible Feeder Fund

IP High Conviction Equity Fund

Risk rating & proposed investment term

Moderate to high risk: 4 to 5-year term

Moderate to high risk: 4 to 5-year term

Moderate to high risk: 4 to 5-year term

High risk: 5 to 7-year term

Asisa category

SA Multi Asset Flexible

SA Multi Asset High Equity

SA Global Multi Asset Flexible

SA Equity General

Minimum lump sum

R10 000

R10 000

R10 000

R10 000

Minimum debit order

R500

R500

R500

R500

Annual Fund Management fee (incl VAT) p.a.

0.65%

0.46%

0.46%

0.86%

For more information click here.

Momentum

Mickey Gambale, head of discretionary investment solutions at MMI Investments and Savings, says a Flexible Tax-free Option is available through its Wealth Investment Series while the Tax-Free Education Savings, Tax-free

Retirement Savings and Tax-Free Dream Savings are offered through the My Savings Portfolio (MSP).

Momentum Wealth is an admin-only platform and the asset classes that an investor invests in should ideally be made in conjunction with a financial advisor, says Kapil Joshi from the same department.

The minimum monthly investment for the Flexible Tax-free Option is R1 000. It is R250 per month for the MSP (with a portfolio minimum of R500), Gambale says.

The products are already available. See www.momentum.co.za

Nedgroup Investments

Seugnet van der Merwe, investment analyst, says Nedgroup Investments will offer its entire range of unit trusts that is eligible within the regulation as tax-free savings accounts.

The range comprises of 21 unit trusts with a variety of risk profiles – it includes equity and speciality equity funds, asset allocation and core (balanced) portfolios as well as international funds to name a few. Almost all these products are available within the tax-free savings accounts.

Van der Merwe says no additional fees are charged for the tax-free wrapper. Hence, the fee structure for the unit trusts in the tax-free savings product is the same as for the existing range of unit trust funds.

The minimum monthly investment is R500 and products are already available. 

More information is available at www.nedgroupinvestments.co.za

Old Mutual

Richard Treagus, head of investments and savings at Old Mutual Emerging Markets, says asset class exposure in the Old Mutual Invest Tax Free Plan will depend on the investment funds selected by the customer from their range of funds.

“These are in form of unit trust and life funds that have exposure to equity, property, bonds and money markets,” he says.

Old Mutual and other fund managers manage the unit trust funds.

The administration fee is 0.75% of the investment value per year, but reduces to 0.50% if the investor chooses to use the Old Mutual funds.

If the full R30 000 is contributed in the tax year, the fee reduces to 0.25%.

Fees exclude any advice fees, which are negotiable between the customer and the financial advisor or broker if the product is bought via a financial advisor.

The minimum regular investment is R350 a month. The minimum lump sum investment is R5 000.

The Tax Free Plan is available through financial advisors and will be made available directly online later in March.

A range of low-cost tracker funds is also offered.

More information is available at www.taxfreesignup.co.za

22seven

22seven, the money management app owned by Old Mutual, offers two funds as tax-free investments via mobile phone – the Old Mutual Core Diversified and the Old Mutual Top 40 Funds.

The Core Diversified fund has exposure to local equities, bonds, property, cash and international equities while the Top40 fund tracks the performance of the Top 40 companies listed on the JSE.

The minimum investment is R350 once off or R350 monthly.

According to its website, the “fixed annual investment management fee for the Old Mutual Top 40 Fund and the Old Mutual Core Diversified Fund is 0.68% per year, including VAT”. 

More information is available at www.22seven.com

Prudential

John Kinsley, managing director of Prudential Unit Trusts, says they are offering a new Tax-Free Class (T-class) for some of their unit trusts.

The details are provided in the table below.

Fund Name

(T-Class)

 

Open to investments

Risk Profile

Annual Management Fee

(excl. VAT)

Income Distribution Frequency

Local Assets

Foreign Assets

Prudential Enhanced Income (Tax-Free)

 2 March 2015

Low/Med

0.60%

0.95%-1.05%

Quarterly

Prudential Inflation Plus (Tax-Free)

2 March 2015

Low/Med

0.80%

1.15%-1.25%

Bi-annually

Prudential Balanced Fund (Tax-Free)

 2 March 2015

Med

0.80%

1.15%-1.25%

Bi-annually

Prudential Enhanced SA Property Tracker Fund (Tax-Free)

 1 April 2015

Med/High

0.60%

 N/A

Quarterly

Prudential Dividend Maximiser Fund (Tax-Free)

 2 March 2015

High

1.25%

 1.25%

Bi-annually

 

The minimum monthly investment is R1 000. The minimum initial lump sum investment is R10 000 – thereafter no minimums apply for lump sums.

More information is available at www.prudential.co.za/our-funds

PSG Wealth

PSG offers the PSG Wealth Tax Free Investment Plan, says Rupert Giessing, head of product development.

Investors can choose between more than 50 unit trusts available on the PSG Wealth investment platform for this product.

“They may invest in any single manager unit trust that does not charge performance fees and offers ‘clean’ pricing,” he says.

Clean pricing refers to the absence of a rebate fee structure.

Giessing says there is no initial charge or switching fees on the Plan and on-going fees will be charged at a rate of 0.228% (including VAT) for PSG Asset Management unit trusts.

For funds from other managers available on the PSG Wealth platform, on-going fees will be levied at 0.57% (including VAT).

The minimum monthly debit order amount is R500 and the minimum lump sum is R6 000.

Direct investors can visit www.psgonline.co.za and register for an account. 

Rock Capital Management 

Pierre van der Walt, director and portfolio manager at Rock Capital Management, says it has created a “B” Unit in its Rock Capital IP Top20 Global Fund that is compliant with the new legislation.

The fund invests globally with the current focus on South Africa and the US.

A flat fee of 1.5% per annum (excluding VAT) applies. No initial fees or penalty fees are charged.

The minimum monthly investment is R500.

More information is available at 086 111 7625 or send an e-mail to info@rockcapital.co.za

Sanlam Investments

Quaniet Richards, head of investments of the Sanlam Investments retail business, says it is offering three tax-free product options:

  • A unit trust product administered by Sanlam Collective Investments
  • A unit trust administered by Satrix Managers, which provides investors access to low-cost index tracking funds
  • An ETF administered by Satrix Managers

Several underlying products are available through each of these categories.

Richards says the investment options offer single asset or multi asset class investments, and offer exposure to all major asset classes – cash, bonds, property and equity (some both locally and abroad).

The minimum monthly investment is R200 for all unit trust funds available via Sanlam Collective Investments, R500 per month for unit trust funds available via Satrix and R300 per month for all ETFs available via Satrix.

More information is available here.

Satrix

Helena Conradie, chief executive officer of Satrix, says all Satrix products will be available as tax-free savings accounts.

The focus is on its flagship funds – Satrix 40, Satrix Balanced, Satrix Low Equity Balanced and Satrix MSCI World Equity.

Fees (excluding VAT) are 0.45% for Satrix 40, 0.6% for Satrix Balanced, 0.6% for Satrix Low Equity and 0.5% for Satrix MSCI World.

All the other ETF funds charge 0.4% except the Rafi, which has a fee of 0.46%. The other unit trust fees are 0.45% except for Rafi, which has a fee of 0.6%. 

For unit trusts the minimum monthly debit order is R500 and the minimum lump sum is R10 000.

For ETFs it is R300 and R1 000 respectively. 

More information is available at www.satrix.co.za 

Standard Bank Corporate and Investment Banking

Mark Humphreys, business manager at Standard Online Share Trading, says existing Online Share Trading (OST) clients can open a new tax-free savings account, which will be added to the list of available accounts they already control. 

There are no (new or additional) fees for this account, but it does require being an OST client, which would have already been attracting a monthly fee of R70 including VAT. The cost of trading in the account is 0.25% plus statutory charges. All JSE-listed CIS ETFs are available for trade (approximately 40), he says.

To open an account click here: https://securities.standardbank.co.za/ost/

Humphreys says a tax-free savings account is also available through the Standard Bank Internet banking portal.

Investors have the choice of 14 ETFs and can elect a rand amount of between R250 and R30 000. This provides the investor the ability to have recurring small monthly investments (a minimum of R250 per transaction) or a once-off lump sum of R30 000. The cost of trading in the account is 0.25% plus statutory charges per transaction, he says.

To open an account log in to Standard Bank’s Internet Banking Portal and click on the Tax Free Savings Account tab.

STANLIB 

Bongani Mageba, managing director of STANLIB Retail, says investors can choose funds from across STANLIB’s core range of Equity, Balanced and Income funds, including a range of risk-profiled funds.

It charges flat annual service fees on each of its funds. The Balanced Fund for example charges a flat service fee of 1%. No additional fee will be charged for wrappers.

The minimum monthly investment is R500 a month. A minimum lump sum of R5 000 can be invested.

Retail investors can start to invest within the first week of March.

More information can be obtained at www.stanlib.com

Sygnia

Magda Wierzycka, chief executive officer, says the tax-free savings account is offered in the form of a unit trust investment through the Sygnia platform.

The options available are shown in the table below.

 

Sygnia Funds

Risk profile

Asset allocation

Management fee per annum (including VAT)

Sygnia Skeleton Balanced 40

Fund

Low risk

 

Global balanced with

40% exposure to equities

and 25% to international

investments

0.40% pa

Sygnia Skeleton Balanced 60

Fund

Moderate risk

 

Global balanced with

60% exposure to equities

and 25% to international

investments

0.40% pa

Sygnia Skeleton Balanced 70

Fund

Higher risk

 

Global balanced with

70% exposure to equities

and 25% to international

investments

0.40% pa

Sygnia SWIX Index Tracker

High risk

 

100% SA equities

0.40% pa

Sygnia Top 40 Index Tracker

High risk

 

100% SA equities

 

0.40% pa

Sygnia DIVI Index Tracker

 

High risk

100% SA equities

 

0.40% pa

Sygnia Listed Property Index Tracker

 

Moderate risk

100% SA listed property shares

0.40% pa

 

Wierzycka says all of the products are passively-managed unit trusts. 

The only other applicable fees are the standard operating costs of a unit trust. Based on the Sygnia Skeleton Funds’ latest TER (total expense ratio) calculations these amount to 0.05% per annum.

Hence the entire cost of investing in a Sygnia Tax-free Savings Account is 0.45% per annum, she says.

No initial fees, exit fees, switching penalties, transfer penalties, administration fees or other hidden costs apply.

The minimum initial investment is a R10 000 lump sum. The subsequent minimum lump sum investment is R5 000. The minimum monthly debit order is R500.

The accounts are already available. Go to www.sygnia.co.za 

Thebe Stockbroking

Currently no direct share trading is allowed within tax-free savings accounts but certain ETFs are eligible for inclusion.

Thebe Stockbroking is offering a Kick Start Plan™.

Existing clients who have already submitted all the relevant documentation will need to complete an addendum.

There is no opening fee for new accounts. A R10 monthly administration fee and a 0.25% flat brokerage rate plus statutory fees apply.

The minimum initial investment is R1 000 and the minimum subsequent investment is R250. A minimum of R250 is required per ETF.

 

“Once funded, Thebe Stockbroking will purchase the ETFs (as selected by yourself) on your behalf,” its brochure states.

 

More information can be obtained here.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   25

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

you can also check if your stock broker is offering a tax free account, mine is. No admin fees and cheap brokerage and I just moved money into the account and bought BBET40 and DBXWD

What do Sygnia’s local and offshore allocations comprise? Are they Swix, Rafi or Top 40? Madga, can you comment please?

1. Stanlib 1% fee suggests they are not expecting too much business.
2. Allan Gray “no plans to offer TFSA’s at this stage”. Looks like they are wanting fewer clients. Difficult to believe that a company of their reputation should adopt this stance.

I wonder if the rules wont change in a few years after investors are sucked in?

If you are planning to invest in a tax free savings account (TFSA) then make sure that you stay away from any offering from an insurance company; the fees on the their products will more than erode any potential tax saving benefits.
2 of the insurers whose products I have seen are Old Mutual and Sanlam.
In short, OM has a minimum debit order contribution of R350 and Sanlam a minimum debit order of R300. Quite attractive – at least until you look at the fees.
OM have a minimum monthly admin fee of R20 – that’s 5.7% pa on a R350 debit order and Sanlam have a minimum admin fee of R30 pm – that’s 10% pa! And we have not even added in the underlying fund fees or advisor fees!
In both instances the admin fee will decrease as a % as the premium increases but given that the TFSA’s are aimed at poorer investors who will on average be contributing at the lower premium levels, these poorer investors are going to stay poor if they use either of these products! Stay away!

Would love to know if and when Sygnia intends to make their Sygnia International Equity Fund available to direct investors. It’s the only reasonably priced international index fund (Sanlam’s costs over 1%). Would be an ideal portfolio diversifier to add a reasonably priced International fund and a cheap property to a tax free account.

I wonder if a person is allowed to transfer R 30000 from one your existing accounts in Satrix to a Tax-free savings account in Satrix?

Sygnia CRM: Our Skeleton Funds track the FTSE/JSE SWIX Index domestically, and the MSCI All World Index and S&P500 Index on the international front.

Sygnia CRM: The Sygnia International Equity Fund is currently available as a life fund. Hence it can be used within RAs, preservation funds and living annuities. The only restriction is for direct investments where the investment would take the form of a sinking fund policy with a 5 year investment term. We are looking at an option of launching it as a unit trust.

Allan Gray isn’t interested because they charge performance fees on all their funds which isn’t allowed on TFSA’s

@Haiybo I use Standard Online Share Trading, they are my online broker and I just opened another TFSA ..

@janmalan you can not transfer ETFs, it must be cash deposited into your TFSA

@Hayibo
Take a look at the Gryphon Global equity Tracker fund – R200 d/o and annual fee of 0.5%. Satrix also have an MSCI World Tracker with an annual fee of 0.5% (dont know if either/both is/are available under the TFSA yet though – but for other funds they are great options)

@The Financial Coach – thanks for the Gryphon Global equity Tracker fund. Much appreciated.

@The Financial Coach – are you sure they offer an international index fund? Can’t find a Gryphon Global equity Tracker fund

I’m personally going to use sygnia unit trusts for my tax free savings account. The main reason I chose an index tracker unit trust over an etf is the fact that I can switch funds without triggering capital gain tax. This is my understanding please point out if this not the case.

Fernanado, within the tax-free framework, capital gains are also tax-free.

Wendy, if I for example wish to move from one etf to another I wont be able to invest that amount, say R100k, back into a tax free savings account. If so the unit trust still seems like the better option. Can anyone give some clarification on this.

Fernando, you can cash in R30000 of your non-tax free UT/ETF each year and put that into a TFSA. You would have to pay any CGT that might arise on the R30000 withdrawal (remember the R30000 exclusion on capital gains) then invest that as “new money” into the TFSA. So it would take 3 and a bit years to “transfer” the whole R100k. It will depend entirely on your own tax position to determine the CGT position during the “transfer” period. Hope this clarifies it a bit.

Thanks for the article Inge. Can you summarise the fees though. Nedbank say they don’t have a fee – presumably there’s still a platform fee. I can’t find it on their website though.
It looks to me as if Sygnia or PSG is the way to go.

Fernando makes a good point. will the “platform vehicle” be treated as the TFSA, or is the ETF itself the TFSA?

If the former, then I can stay within the TFSA-product, and switch to heart’s content between the various ETF-options provided.

If the latter, the action would be deemed the surrender of the existing TFSA, and an investment in a new TFSA –> perhaps you can ask Magda?

I’ve picked up a similar “theme” –> TFSA with a defined term/maturity. Strictly speaking you are forced to take your money in the end. Does anybody know how the product providers (&SARS) view this?

The most recent comment is correct. The ETF is an investment instrument and not a TFSA. You can buy an ETF within a TFSA (there are different forms offered by different providers/platforms). But investing in an ETF directly will not qualify as a TFSA. In terms of defined terms/maturities, once again that would be the underlying investment within an TFSA which can then be switched or rolled over to another investment. The actual TFSA will sit above that. No well designed TFSA can force you to take the money out as that would mean that you “lose” the future tax benefit associated with that investment.

Some suppliers use Unit Trust funds only – which don’t allow you to nominate beneficiaries. The money must be paid into your estate and will then become liable for executor’s fees and even estate duty- a form of taxation. Is your investment then really tax free? Or cost free?

“E” – an ETF is just a kind of fund. It is a tracker fund, that tracks stock exchange indices. (ETF = Exchange Traded Fund). Your TFSA is a Tax Free Savings Account. From the TFSA your savings will be placed into a variety of funds you choose (depending on the company and product).
Only certain types of funds may be used – those most cost effective to the client. The government has also placed other restrictions on costs your TFSA may charge – so everybody is advertising ‘free this and that’ or R0 costs. This is in fact a government restriction.
Most TFSA’s offered by banks are in the form of deposits, for which they offer interest – hence no admin fees.
The more flexible a plan is, the more likely it is to attract an admin fee. You have to pay somebody for going the extra mile… such as a combined plan that offers both a tax free savings component and flexible plan for funds in excess of the allotted R30,000 per annum.
Old Mutual offers to transfer amounts from the flexible portion in consecutive years, so as to take full advantage of the tax free allowance each year.
So you can move all your money from the Unit Trust account and let Old Mutual manage the spread for you year on year.

Financial Coach – you are way off on the ‘stay away from insurance companies’ – Your info is way wrong. Did you really think insurance companies could be so daft?
Old Mutual only has a minimum R20 monthly fee UNLESS you have a monthly debit order in place – in which you could pay up as little as 0.25% per annum in management fees. Sygnia also has adviser fees initial of up to 1.5% and ongoing up to 1.5%.
Adviser fees are very limited with Old Mutual, and of course – they are negotiable.

Load All 25 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: