How much you could earn in a tax-free investment account over 2, 4 and 10 years
Starting in 2015, the National Treasury introduced a number of incentives for tax-free accounts with the aim of encouraging disciplined long-term savings.
Regarding tax-free savings and investment limits, an individual can currently contribute up to R33,000 per year with a lifetime contribution limit of R500,000.
According to Roenica Tyson, head of investment products at Glacier by Sanlam, tax-free savings and investment accounts tick many positive boxes as part of a diversified financial plan.
She added that she would encourage all investors to consider including one in their portfolios and take the opportunity to grow their savings without paying tax on the interest, dividends or capital gains they have. they win.
All good things come to those who wait
“Life does come and unforeseen events sometimes force us to dip into our savings, but I encourage investors in this product to resist the temptation to opt out for disciplined and lucrative savings,” Tyson said.
In this way, she said that investors should view tax-free investment plans as additional savings for your retirement investment.
To illustrate why it is better to leave this money for as long as possible, she gave the following example.
The table below shows example values (including tax savings compared to a normal investment plan) based on a monthly investment of R 2,750 over a period of 2, 4, 6, 8 and 10 years, for an aggressive investor, and with intermediation fees of 0.50%.
The remarkable point is that over a 10-year period, the total contributions of 330,000 Rand can reach 536,048 Rand, which is 29,222 more than a similar plan without the tax savings.
* Table assumes 11% return per annum and 35% marginal tax rate on investment plan returns.
|Year||Tax Free Savings Plan||Investment plan||Tax savings||Cumulative contributions|
|2||R72 296||R71 951||R345||R66,000|
|4||R158 868||R157 308||R1560||R132,000|
|6||R262,534||R256 968||R5 566||R198,000|
|8||R386 714||R371 567||R15 146||R264,000|
|ten||R536 048||R506 826||R29 222||R330,000|
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