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What you need to know about tax-free investments

What is a tax-free investment?

National Treasury has introduced tax-free investments to encourage people to save. The investment return earned on a tax-free investment isn't taxed and the money in a tax-free investment can be withdrawn at any time.

Why save in a tax-free investment?

  • A tax-free investment is an effective way to save for your goals. Any interest, dividends or capital gains from your tax-free investment will be tax-free. This means that you don't pay tax on the growth on your investment.
  • Your money can grow faster in a tax-free investment than in a regular savings account because you don't pay tax on the investment return.
  • Saving in a tax-free investment gives you flexibility as you don't have to commit to any future contributions. You can withdraw from your investment at any time. However, withdrawing funds may prevent you from reaching your savings goals and will use up part of your lifetime limit for tax-free savings.

How much can I save in a tax-free investment?

National Treasury has put limits on the amount you can save in a tax-free investment. The total annual contribution in one tax year may not exceed the annual contribution limit, which is currently R33 000 per tax year. The total lifetime contribution may not exceed R500 000. Make sure you keep track of how much you've paid so that you don't exceed your limit across all approved tax-free investments (at Sanlam Investments or other providers).

Can I have more than one tax-free investment?

Yes. There is no limit on the number of tax-free investments you can have. Make sure your annual payments across all approved tax-free investments (at Sanlam Investments or other providers) do not exceed the annual contribution limit.

What happens if I invest more than R33 000 per year in tax-free investments?

Any contribution over R33 000 per tax year or R500 000 over a lifetime is taxed at 40%, so you would need to monitor your contributions closely.

Can I transfer a tax free investment from one provider to another?

No transfers between tax free investment providers is allowed as yet. National Treasury intends to expand the Regulation to allow individuals to transfer any amount in a tax free savings and investment account from one institution or product provider to another.

What if I’m an existing client with Sanlam Investments?

The final Regulations provide that a client may not convert existing investments into a tax free investment. National Treasury is investigating the possibility and any changes will only be finalised later this year.

What is the impact of withdrawals?

Although allowed, withdrawing may not be a great idea. For example, if you invested R20 000 and then withdrew R20 000 in the same tax year, you would only be able to contribute an additional R13 000 in the same tax year before reaching the R33 000 annual contribution limit.

Can I open an account on behalf of a child?

Yes, you can open a tax-free account in the name of your children and sign the application on their behalf, if they are minors. By doing this you will be using part of their tax-free allowance, which limits their ability to save for themselves via this type of product later on. Also be careful of donations tax if you donate more than R100 000 per year. You need to declare the amount that you invested in your child’s account in your tax return.

Unit trusts in a nutshell

The Sanlam Group is a full member of the Association for Savings & Investment SA (ASISA). When you invest in a unit trust (also called a collective investment scheme), your money is pooled with the money of other investors. This pool of money is used to buy a portfolio of assets, such as shares (equities), bonds or listed property. As an investor, the value of the units you own is calculated by taking the number of units you own and multiplying them by the latest ruling price per unit. Forward pricing is used. Also, you’ll find details of what each fund invests in, as well as its risk profile, specified in the Minimum Disclosure Documents.

The price per unit (excluding money-market type funds) goes up and down according to the value of the underlying assets in the relevant portfolio. As is always the case, neither your capital nor the return of your investment is guaranteed for any unit trust fund investment. For information on unit trusts and how they work, along with our full range of funds and the relevant Minimum Disclosure Documents, please visit www.sanlamunittrusts.co.za or call us on 0860 100 266.

A few extra definitions and considerations

  • A fund of funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges. This could result in a higher fee structure for the fund of funds.
  • A feeder fund is a portfolio that, apart from assets in liquid form, consists solely of participatory interests in a single portfolio of a collective investment scheme, which also levies its own charges, which could result in a higher fee structure.
  • Sanlam Collective Investments takes full legal responsibility for the co-branded portfolios (e.g. Graviton funds).
  • Portfolios that invest in international investments, or investments in foreign securities, could be accompanied by additional risks, such as potential constraints on liquidity and repatriation of funds, macro-economic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information.
  • Income payment(s) will only be paid out to a client’s bank account  if the investment transactions (e.g. debit orders and deposits) used to purchase units have been cleared by the payment(s) will automatically be reinvested.

Charges and fees, in a nutshell

We’re working to keep things cheaper and more profitable for you by not charging any performance fees or rebates. You’ll find a schedule of fees, charges and maximum commissions on the Minimum Disclosure Documents, Remember you can obtain the Effective Annual Cost (EAC) of your investment by making use of our EAC Calculator. Please do bear in mind that...

  • The following will be levied against the portfolio: brokerage, auditors’ fees, performance fees, service fees, applicable taxes, custodian fees, bank charges, trustees’ fees and trailer fees (trailer commission is paid by Sanlam to financial advisers on a monthly basis; it forms part of the annual service charge, which is a fixed percentage per annum that is calculated and deducted daily from the accrued income in the portfolio).
  • The following fees are charged to the client: Sanlam manager’s fees as well as broker advice fees. Commission and incentives may be paid and if so, will be included in the overall costs. The fund manager may borrow up to 10% of the portfolio to bridge insufficient liquidity.
  • Debit orders will automatically be cancelled if funds are returned from the bank after 3 consecutive occasions. If a debit order or direct debit is returned by the bank due to insufficient funds being available or for any other reason, the units purchased for that transaction will be reversed (at no cost to the client) and the client’s unit trust account will be debited with the units allocated. The client will be liable for any bank charges incurred as a result of a direct debit or monthly debit order being rejected by the bank.

Factors and cut-off times for making transactions

Please make sure you send us your completed instruction (including supporting documents) before the transaction cut-off time. The SA business day transaction cut-off times for our funds are:

11:00 for Sanlam Alternative Income Funds
13:00 for money market funds
15:00 for all other funds.

A few more things to remember

  • We can only process your instruction once we’ve received the correct and accurately completed form and the required supporting documents. If an instruction is issued incorrectly, is unclear, incomplete, or if the supporting documents are not received by the cut-off time, the processing of the transaction will be delayed. Any loss will be for the investors’ account.
  • Your transaction will be priced using the ruling price of the fund for the day the transaction is processed, in other words, the day we receive all of the required information. Any loss will be for the investor’s account. Any interest earned on: money deposited for investment in a fund after the specified cut-off time, incorrect deposits or deposits for applications with outstanding requirements, will not be paid to the client as we are unable to transfer the money in the fund(s) account.
  • If a debit order collection date falls on a non-business day, we will collect it on the first available business day thereafter.

Facts on ownership, information security and instructions

  • The legal owner of the investment is the person in whose name the investment is registered, regardless of who the payer is. If the legal owner is a minor, we will only accept instructions from their legal guardian. We will only release information to, and act on instructions from, the investor, the authorised signatory or the appointed financial intermediary.
  • We can only process your instructions once we have received the correct and accurately completed form and required supporting documents. If an instruction is issued incorrectly, is unclear, incomplete, or if the supporting documents are not received by the cut-off time, the transaction may be delayed. Any loss will be for the investors’ account.
  • We permit ring-fencing for large withdrawals in terms of Notice 573 of the Collective Investment Schemes Control Act. Ring-fencing is the separation of assets and the delayed sale of units in a unit trust fund, in the event of a large sale of units within the fund, subject to certain conditions. This ensures that the sale of a large number of units will not force us to sell the underlying investments at a price in the market that could have a negative impact on other investors. We may delay paying the proceeds of the sale of units. If your sell instruction is affected by this ring-fencing, the payment and the value of your withdrawal could be impacted. In the event of this, we will contact you to discuss the process, where applicable.

Unclaimed assets and how they affect you

As a member of the Association for Savings and Investment SA (ASISA), we follow ASISA’s Unclaimed Assets standard.

  • An unclaimed asset is any unit trust investment on which there have been no transactions for ten years, or in the case of a deceased estate, more than three years have passed since we have received the notice of death.
  • Our policy is to continue reinvesting all income distributions (interest) and redemption payments until the unit trust is sold, regardless of the time frame. According to ASISA’s Unclaimed Assets standard, we follow a process of tracing investors or beneficiaries on any unclaimed assets. Any reasonable administrative and costs incurred to trace the investor may be recovered from the value of the portfolio, thereby reducing the value of your investment. Tracing will cease where the value of the unit trust investment is less than R1 000 and the costs of tracing exceeds the benefit of tracing.

More information on the ASISA Standard on Unclaimed Assets and the processes is available on www.asisa.org.za or from our cliebt service centre on 0860 100 266. Please note that to prevent your investment becoming an unclaimed asset, it is your responsibility to inform us of any change in your personal information.

What to do if you change your surname, personal details or address

It’s your responsibility to keep us informed of any changes in your banking details, personal information or current identification information (e.g. change of address, change of surname and contact details). If any of your details have changed, click here to download the Investor Details Update form

What to do if you have a gripe

We want to give you outstanding client service, but sometimes things do go awry.

  • If you’re dissatisfied with our service, or if any of our products have disappointed you, we want to hear about it. So please get in touch with us in whichever way suits you best:
  • We want you to know that your views are very important to us.  When we receive your complaint, a competent team, specifically trained to handle and resolve complaints, will investigate it and try to resolve it as soon as possible in a fair manner.
  • If the complaint has not been resolved to your satisfaction, you may refer it to the Sanlam Arbitrator. The Sanlam Arbitrator is an impartial person that settles disputes between dissatisfied clients and Sanlam.
    Sanlam Arbitrator contact details:
    Fax: +27 21 957-1786
    Email: arbitrator@sanlam.co.za

Want to know how we process your personal information?

We collect certain personal information about you in order to offer you the best possible service. Here’s how we keep that information safe...

  • We will not share this information outside of the Sanlam Group, its associated groups or agents, without your explicit consent. In order to provide you with an effective service, we may be required to share this information with our administrators or agents who perform certain services for us (e.g. mail houses who post your statements on our behalf), members of the Sanlam Group, your financial adviser or broker, as well as with any regulatory bodies as the law requires. We may share your information with foreign regulatory bodies if required. Your information is used for administrative, operational, audit, marketing, research, legal and record keeping purposes.
  • We will take all reasonable steps necessary to secure the integrity of any personal information which we hold about you and to safeguard it against unauthorised access. If you don’t consent to us using your personal information, there may be delays or some instructions might not be carried out.
  • You can have access to your information at any time and ask us to correct any information we have in our possession. Please feel free to write to us to obtain a copy of this information. We keep relevant documents for a period of five years or more as required by the law. If you consent to us retaining your personal information for periods of longer than 5 years, we will restrict access to your information. It will only be processed for storage or for purposes of proof. Sanlam and all its group companies are required to collect relevant information from each client to ensure their identification and classification for tax purposes is correct according to the IGA, and report on these clients to the South African Revenue Services ("SARS") where necessary. The Intergovernmental Agreement ("the IGA") entered into between the Governments of South Africa and the United States of America was designed to improve international tax compliance and to implement the Foreign Account Tax Compliance Act ("FATCA"), and equivalent IGAs between the Government of South Africa and any other countries.

Contact us

Phone 0860 100 266