Following the National Budget Speech and amendment on March 1, Tax-Free Savings Accounts (TFSAs) have been launched which are aimed at encouraging medium to long-term savings, while giving clients the option to access their funds at any time.
In this competitive market however, there are a vast amount of products available to clients which may cause confusion. Clients need to be informed to make sound financial decisions. This is where financial advisers play important roles to ensure clients are fully educated and aware of what products are available to them.
With the tremendous amount of products available on the market, FAnews approached a few companies to share the Tax-Free Savings Account offerings they have launched into the market. More information on these products can be found on the FAnews website (http://www.fanews.co.za) or on the company websites.
What follows below and on the following pages, is a medley of choices.
Discovery Invest
Minimum amounts
• Once-off lump sum of R30 000 a year.
• Recurring contributions of between R850 and R2 500 per month.
Management fees
Discovery Invest does not charge any initial fees and only has an annual administration charge of 0.3% plus Value Added Tax (VAT) on Discovery Funds and 0.55% plus VAT on external funds.
Withdrawals
Clients can withdraw at any time and at no cost.
Investec
Minimum amounts
Investec’s Tax-free Fixed Deposit requires an initial investment of R30 000, which fully utilises the first tax year’s annual contribution - this is our minimum and maximum investment required per annum.
Management fees
There are no fees levied on a client’s investment.
Withdrawals
Investors are able to redeem or reinvest the investment at the end of each 12 month period. However, if access is required to these funds in the case of an emergency, early withdrawals will be made available within 32 business days of the request, subject to a maximum penalty of R300. The tax-free savings account is not a transactional account and clients are encouraged to not withdraw funds in order to build savings.
Investment Solutions
Minimum amounts
• R30 000 if only a single lump sum is invested; or
• A monthly investment of between R500 and R2 500; or
• A combination of a monthly investment plus a lump sum investment, not exceeding
R30 000 per annum.
Please note this product will only be available from 1 May 2015.
Management fees
Investment Solutions does not charge an administration fee. The management fee varies between 0.60% and 1.45% (incl. VAT) per annum on the investment value depending on the risk profile of the fund. This fee is the total fee charged to the client which includes the asset management fee and the product fee. It is also indicative of the TER.
Withdrawals
Clients can withdraw at any time and at no cost.
Momentum Investments and Savings
Minimum amounts
• Flexible Tax-Free Option: the minimum lump sum is R15 000 and the minimum recurring contribution is R1 000 per
month.
• Tax-Free Education Savings, Tax-Free Retirement Savings and Tax-Free Dream Savings available through the My Savings
Portfolio (MSP): the minimum recurring contribution is R250 per month (with a portfolio minimum of R500 per month).
Management fees
A client will be subject to an administration fee and a fund manager fee. The fund manager fee applies to the respective standard or clean class of the fund chosen. The administration fees for both products range from 0.23% to 1.25% and are dependent on the client’s aggregated investments. For My Savings Portfolio (MSP) there is also an additional fixed fee of R20 per month.
Withdrawals
The money in a tax-free investment account can be withdrawn at any time. However, if an investor wants to re-invest the money that was withdrawn, it will be seen as a new contribution.
Old Mutual
Minimum amounts
The minimum investment amount is R350 per month, or once-off lump sum investment at R5 000 minimum. If your client wants to make any ad hoc top up lump sum to your existing investment, the minimum is R1 000 per top up.
Management fees
Old Mutual’s administration fee is 0.75% of the investment value per year, but drops to 0.50% if the client uses Old Mutual’s underlying investment funds. It goes to 0.25% if the client contributes the full amount of R30 000 a year.
When it comes to the asset management fee, the Old Mutual Top 40 Tracker Life Fund is only 0.20% per year. This fee excludes the advice fee, which is negotiable between the client and the financial adviser.
Withdrawals
The client can withdraw money from his or her Tax-free Plan anytime, without any additional costs. There is also no minimum investment term, which means clients can access their savings anytime.
Prudential Investment Managers
Minimum amounts
The minimum monthly investment (via debit order) is R1 000, while the minimum initial lump sum investment is R10 000; thereafter no minimums apply for lump sums.
Management fees
Prudential does not charge initial (up-front) fees on any products. The annual management fee varies between 0.60% and 1.25% depending on the risk profile of the fund.
Withdrawals
Withdrawals can be made at any time by the client, free of charge. There are no lock-in periods or early withdrawal penalties.
PSG Wealth
Minimum amounts
The minimum initial lump sum investment for the PSG Wealth Tax-free Investment Plan is R6 000. Minimum debit order investments are R500 a month, R1 500 a quarter or R3 000 half-yearly. Debit order and ad hoc lump sum investments can be combined. Clients can elect to automatically increase their regular contributions by a specified percentage each year.
Management fees
PSG does not charge any initial administration fees, and on-going administration fees will be charged at a rate of 0.228% p.a. (incl. VAT) for PSG Asset Management unit trusts. For funds from other managers available on the PSG investment platform, on-going administration fees will be levied at 0.57% p.a. (incl. VAT). The underlying fund management fee will depend on the individual funds selected for investment.
Withdrawals
There are no restrictions on withdrawals.
Sanlam Investments
Minimum amounts
• R200 per month or R5 000 lump sum for all unit trust funds available via Sanlam Collective Investments.
• R500 per month or R10 000 lump sum for all unit trust funds available via Satrix.
• R300 per month or R1 000 lump sum for all ETF funds available via Satrix.
Management fees
The Sanlam Investment Management active offering’s annual management fees range between 0.42% and 1.5% depending on the fund selected. Our Satrix passive offering’s annual management fees range between 0.45% and 0.6%.
Withdrawals
Clients may withdraw money at any time, but legislation discourages unnecessary withdrawals: no amount withdrawn may be replaced. Every contribution counts towards a client’s annual allowance and brings him or her closer to the limit, even if the client is only putting back money he or she withdrew in that same year.
Sanlam Personal Finance
Minimum amounts
• Core option: a minimum recurring payment R300 per month, and a lump sum of R15000, investing only in Satrix funds.
• Comprehensive option: a minimum recurring payment of R500 per month, and a lump sum of R15 000, which offers a wider selection of funds.
For regular payments we allow monthly or annual payments to be made.
Management fees
The management fee works on a sliding scale based on Assets Under Management (AUM), and can drop to as low as 0.2% p.a. Your clients can influence the fees by contributing regularly to their plans and/or getting your friends and family to take out a Sanlam Tax-Free Investment as well. When your client purchases the Sanlam product they will receive a Social Savings Group number. This number can then be used to send to friends and family, who in turn, can use this number to take out their own Sanlam tax-free product. Sanlam then looks at the AUM of all the members in the group when calculating the fee – meaning that the more people who save, the cheaper the product gets for everyone.
The social sharing has no impact on the ownership of the plan. It allows clients to link their savings to other members in their group for fee calculation purposes only. Each individual still has his or her own policy number, and the funds invested under each policy number belong solely to that individual.
Withdrawals
There are no charges for withdrawing funds from the plan.
Standard Bank
Minimum amounts
A minimum deposit of R250 is required to open an account.
Management fees
There are no monthly management fees and clients will not be charged for making regular deposits into their accounts. There is however, a fee charged for withdrawals from the account.
Withdrawals
A client is able to access his or her funds immediately from the account, however the aim of the Tax-Free Savings Account is to encourage the client to save for the long-term benefit. Any withdrawals from the account will be subject to the annual contribution limit and will affect the client’s overall threshold in the year. Any withdrawals and inter-account transfers will attract fees of up to R85. For a branch inter-account transfer out of the account, the client will pay R42 and for bank cheques
the client will pay R85.
Stanlib
Within a single account, investors can access money market and income funds, balanced funds, equity and property funds as well as global funds. STANLIB provides the flexibility to switch at any time into any of these products.
Minimum amounts
STANLIB requires a minimum debit order of R500pm, and a maximum of R2500pm. The annual maximum amount of R30 000 can be contributed as a lump sum, and there are no stipulations.
Management fees
The only fee STANLIB charges is the underlying service fee within the selected Fund. This varies between 0.5% – 1% pa, excluding VAT.
Withdrawals
STANLIB’s Unit Trust Tax-Free Savings Account range charges no initial, performance, penalty and termination fees. Funds are accessible within 48 hours, and there is no charge for withdrawals.
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