South Africa has been reported to have one of the worst personal saving rates in the world! The bottom line is savings are the only solution in times of a financial crisis. It’s peculiar how the human mind plays tricks on an individual into believing our savings is just another payment.
No! The difference with every other payment and contributions to your savings is the latter is your wealth creation! You can never become poor by saving but you certainly can by not! In light of the recent budget speech and tax savings; to date earnings and saving were subject to tax depending on the product used however government has introduced a tax free saving product to individual investors. As per legislation your annual contributions are subject to R30 000 and R500 000 in a life time per individual.
This attracts zero percent capital gains tax when you access your money or switch funds and no tax on interest earned and dividends or withdrawals. You may not transfer ownership upon death however you may elect a beneficiary. This means that not only can you save on executors fees but your beneficiaries can access funds quicker without the hassle of it being caught up the winding of the estate.
Naturally when it comes to the selection of the underlying investment funds its best to seek professional advice from a financial planner to ensure your objective needs and time frame is met and your tax free investment is structured accordingly. With all the despondency surrounding the South African economy and government these positive changes in legislation are always welcomed and should definitely be taken advantage off!
