Personal investing

Make the most of your tax benefits

The South African Revenue Service (SARS) has put several tax incentives in place to encourage us to save more for our retirement and other long-term goals. You forfeit these if you do not make use of them each year. With the end of the tax year approaching, Carla Rossouw explains the differences between the available products.

There are tax benefits associated with both retirement annuities (RAs) and tax-free investments (TFIs), but the benefits are structured differently, and the product rules are quite distinct. Depending on your goals and objectives, there may be a place for both products in your investment portfolio. 

Understand your options

Table 1 summarises the key features of the Allan Gray Retirement Annuity and the Allan Gray Tax-Free Investment. A good, independent financial adviser can help you decide which product is most appropriate for your circumstances.

Let the magic of compound interest work for you

The longer you leave your money invested, the harder compound interest can work for you. Graph 1 shows how much an initial investment of R33 000 (the annual TFI contribution limit) could grow over 20 years. The total growth is shown in nominal terms (i.e. includes inflation) and we have assumed an average annual return of 10%.

Make sure you submit your instruction in time

Table 2 provides the cut-off dates for instructions for the 2019/2020 tax year. All payments need to be accompanied by the applicable instructions (applications for new investments and additional contributions for existing investments) and must be submitted by 14:00 on the relevant date.

If you would like to contribute to the Allan Gray Retirement Annuity or Allan Gray Tax-Free Investment from your basic unit trust account (i.e. an account number that starts with AGLP or AGUT) instead of from your bank account, you will need to submit two separate instructions – a withdrawal instruction from your AGLP/AGUT account and a new investment or an additional contribution into your RA or TFI account.

The financial services, products or investments referred to on this website are not available to persons resident in jurisdictions where their availability or distribution would contravene local laws or regulations and the information on this website is not intended for use by these persons. This website is for information only and does not in any way constitute a solicitation or offer by Allan Gray Proprietary Limited or any of its associates or subsidiaries (collectively “Allan Gray”) to buy or sell any financial instruments or to provide any investment advice or service.

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(a) I am not a South African citizen; or 
(b) I do not reside in the Republic of South Africa; or 
(c) I am not otherwise a person to whom the communication of the information contained in this website is prohibited by the laws of my home jurisdiction; and 
(d) I am not acting for the benefit of any such persons mentioned in (a),(b) and (c) and 
(e) I confirm that any investment with Allan Gray is based on my own initiative and not due to any offer or solicitation by Allan Gray.