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Coronation, Allan Gray to launch tax-free savings accounts

Within the next few months.

JOHANNESBURG – South Africa’s two largest unit trust managers plan to launch their own tax-free savings accounts (TFSAs) within the next few months.

When TFSAs were first introduced on March 1 this year, Coronation Fund Managers and Allan Gray did not offer any products in this space as it was still in discussions with National Treasury about the requirements.

TFSAs allow individuals to invest up to R30 000 per annum in a variety of asset classes. All proceeds on the underlying investments (interest, capital gains and dividends) are 100% tax-free. A lifetime capital contribution limit of R500 000 applies. The introduction of these vehicles is an effort by Treasury to encourage consumers to save and to reduce their financial vulnerability.

Richard Carter, director and head of product development at Allan Gray, says they are working on their own product, which he hopes will be available within the current tax year.

The TFSA will be consistent with its current offering. It will be a platform product where investors can select different investment funds available in the account. The normal investment fee will be applicable depending on the chosen funds.

Coronation’s tax-free investment will be launched during the third quarter of this year.

Pieter Koekemoer, head of personal investments, says the product will be marketed as a tax-free investment (TFI) and the approach will be the same as for all other products with tax incentives (for example retirement annuities).

No administration fees will be levied and the investor will only pay the underlying unit trust fees, which differ depending on fund choices.

Koekemoer says its normal investment limits (R500 for debit orders or a R5 000 lump sum) will apply subject to the regulatory requirements (R2 500 for monthly debit orders or a R30 000 annual lump sum).

He says at first, investment choice will be limited to those funds that do not charge performance fees.

However, Coronation does expect that the restriction will be lifted in due course and that its whole range will qualify for inclusion over time.

Currently no products with performance fees are allowed in the TFSAs. Prior to the introduction of the accounts, National Treasury indicated that the current approach would be reviewed in future as part of other reviews.

“This will be done taking into account the need to treat customers fairly and lower charges in the financial industry,” it said.

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Interesting development because Allan Gray had “no plans to offer tax-free savings accounts” on 5 March 2015 according to a Moneyweb report. Allan Gray must have realised that it is better to have an influx on savings on the books (with regulations) than to see those cash piles go elsewhere.

Pity Allan Gray is so late off the mark. I was intending to open 2 x 30000 TFSA’s for my granddaughters, but the money had to be spent on hardware and systems to soften the blow of Eskom’s load-shedding and their upcoming prices increases, so there’s nothing left in the kitty.

(interest, capital gains and dividends) are 100% tax-free…..
South Africans will always be suckers….. its not the taxes…. “its the charges, stupid”…… the banks and financial institutions still take a cut.

I will fall for this if financial institutions can stop taking a portion of my growth…. I mean the money is with them they can lend it out as loans and make a “packet” but take nothing from me.

I am putting R2500 per month into unit trusts through Old Mutual within the tax-free framework. If you use their funds the charges are 0.5%. If you put in the full R30,000 per year the charges are reduced to 0.25%.

“If you ain’t first, you’re last” – Reese Bobby

@wendy web you clearly missed the asset mangment fee part of 1.08%


Asset management fees of 1.08% a year will be deducted from your returns.
Administration charges of 0.50% a year will be deducted from your fund value.
The administration charge will be a minimum of R20 per month, unless a regular payment is set up.
If you invest the maximum allowance per tax year, we will refund you HALF your administration charges for that tax year.

@Wendy Webb….can you refute qwerty’s charges that you omitted? If not, I hope you are not a peddler of Financial Products?

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