SA youth maximising opportunity to invest in Tax-Free Savings

Pieter Du Toit, CEO of FNB Investments.

FNB Investments says South African youth are maximising the opportunity to invest in Tax-Free Savings. This follows a finding that 17% of FNB customers, aged between 21 and 30, have opened a Tax-Free Savings account and have opted for the shares option.

Pieter Du Toit, CEO of FNB Investments says it’s great to see that younger consumers are becoming more investment savvy. He says those who are maximising the Tax-Free Savings opportunity will generate better returns as they will pay no dividend tax or capital gains tax.

“Tax-Free Savings has been a useful investment vehicle for young people as it mitigates a number of barriers to entry. Moreover, we believe that our user-friendly online platforms are important enablers for young consumers who may have never considered investing before.” Du Toit says the current trend could be valuable in boosting South Africa’s savings rate as young people are the majority of the population.

Recently, FNB Investments revealed that most South African consumers have not yet utilised their tax free savings benefit for 2016, and they only have until 29 February 2016 to make use of their annual R30 000 contribution limit into a tax free investment of their choice. The bank says 69% of its customers who have invested in a Tax-Free Savings Account have not used their full R30 000 tax free saving opportunity.

“Maximising this small window is a smart financial move for two reasons. Firstly you will benefit from the tax free investment and secondly because the longer you invest your money for, the more you will benefit from earning compounded returns over the period of your investment. With your returns also being tax free, this benefit is further increased,” says Du Toit.

To make the most of the tax free benefits, consumers can invest up to R30 000 in a tax free investment before the end of February. At FNB they have the convenience of electing to invest either in a Tax-Free Shares or a Tax-Free Cash account.

“The cash account is ideal if you are investing for the shorter term and need quick access to your money. Shares are a smarter option for longer term investments because you will not pay tax on your dividends earned and you will further benefit by paying no capital gains tax.

“If you are planning to invest for 3 years and more, the Tax-Free Shares account helps you to grow your investment faster than inflation so that you can maintain the buying power of your money and benefit from capital growth, enabling you to reach your goals sooner,” he adds.

You can start a tax free shares account with a contribution of just R300 per month and invest in the top 100 companies listed on the Johannesburg Stock Exchange. What’s more is that all trades placed on the first trading day will attract a fixed trading fee of 0.1%.

“When investing in shares, it is important to remember that fees can erode the returns that you earn on your investment, so pay careful attention to what you are paying. FNB have gone to extreme lengths to ensure that our Tax-Free Shares account offers consumers the low fees so they can gain the maximum benefits from their returns and tax advantage,” concludes Du Toit.