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Glacier Tax-free Investment Plan Frequently Asked Questions

Tax-Free Savings Accounts (TFSA) are government’s initiative to create a savings culture in South African households. It incentivises individuals to save, through tax exemptions.

Via a TFSA, individuals can put their savings into suitable investments and not pay tax on the investment income and capital gains that they earn, or on withdrawals from the plan.

At Glacier, we are dedicated to improving the savings culture in the country, and in answer to government’s initiative, we’ve introduced the Glacier Tax-Free Investment Plan.

About the Glacier Tax-free Investment Plan

What is the Glacier Tax-Free Investment Plan?

Glacier is an administrative financial services provider and is therefore an approved provider of the product introduced by National Treasury. The Glacier Tax-Free Investment Plan can be accessed with the help of a financial planner.

The minimum investment amount for the Glacier Tax-Free Investment Plan is either:

  • a lump sum of R36 000; or
  • a debit order of R3 000 per month.

Clients will have access to:

  • zero initial fees on lump sum or recurring investments into the Tax-Free Investment Plan;
  • a wide range of investment choices at competitive annual administration fees.

What are the benefits of a TFSA?

A TFSA allows individuals to set money aside and watch those savings grow, tax free, throughout their lifetime. They’ll benefit from the effects of compounded growth, while interest, dividends and capital gains earned in a TFSA are tax free.

Who is eligible for a TFSA?

Only natural persons can invest in this product. Legal entities (e.g. companies) and trusts will not be eligible to invest in a TFSA.

A TFSA can be held in the name of any individual, including children. All account holders will need to have a bank account in their own name in order to transact in the TFSA once it has been opened.

How is the TFSA different from discretionary, endowment or contractual savings products?

The following table highlights the tax treatments for individuals across the various types of products.

Investment Plan

Endowment

RA, Preservation Funds, ILLA

Tax-Free Investment Plan

Dividends

20% withholding tax

20% withholding tax

Contractually up to retirement age, a client will be in the same tax position as a Tax-Free Investment Plan (0%), provided no withdrawals are made.

Tax will apply when a withdrawal is made, including the payment of a lump sum at retirement. Specific tax tables are applicable.

For more information, please refer to a tax guide.

0%
Interest

Age < 65: first R23 800 is tax-free;

Age > 65: first R34 500 is tax-free

Fixed 30% withholding tax

0%
Capital gains tax

40% of marginal tax rate;

Annual exemption of R40 000

Fixed 12% withholding tax

0%

Contributions

How much is an individual allowed to contribute?

The maximum TFSA contribution limit is currently R33 000 in any given tax year (1 March to the end of February). An annual lifetime limit also applies, and this is currently set at R500 000.

The minimum amount to access the Glacier Tax-Free Investment Plan is R33 000.

Can an individual use their existing discretionary savings to contribute to a TFSA?

Yes, but it is extremely important to understand that any realised gains from such investments will incur capital gains tax.

What happens if an individual over-contributes?

Any contributions exceeding the prescribed annual and lifetime limits will be taxed at 40%.

There is no limit on the number of Tax-Free Savings Accounts an individual can have across different service providers. However, they need to ensure that their annual contributions across all their Tax-Free Savings Accounts (at Glacier and other providers) do not exceed the annual and lifetime contribution limits. It is the individual’s responsibility to monitor their annual contributions.

What happens if an individual has not contributed the maximum of R36 000 in a given tax year?
Will the allowed contribution for the next tax year be increased by the amount of the under-contribution?

Unfortunately not. The maximum contribution in any given tax year is R36 000 regardless of whether the client has used his/her past contribution limits in full.

Withdrawals

Are there limits on how much an individual is allowed to withdraw?

No, they can take out as much of their money as they want, whenever they want.

Can withdrawals be reinvested in a Tax-Free Investment Plan in future? What are the options?

An individual’s TFSA savings can be withdrawn from their account at any time, for any reason, and all withdrawals are tax free. The full withdrawn amount can be put back into the TFSA, but this will be regarded as a contribution. It is the individual’s responsibility to ensure that this does not breach their contribution limit within a tax year, as an overcontributed amount will be subject to a 40% penalty tax.

Other

What type of investments can an individual hold in a Glacier Tax-Free Investment Plan?

Individuals can select from a wide range of collective investment funds on Glacier’s platform, including selected wrap funds. (Funds with performance-based fees, as well as personal share portfolios are excluded.)

How long can someone invest in a TFSA?

There is no restriction on how long an individual can invest their money into a TFSA.

What happens at death?

On death, the investment will form part of the estate and estate duty may be payable. While the investment is held within the estate, the returns on it will remain exempt from income tax, dividends tax and capital gains tax.

Note that when transferring the amounts in a Glacier Tax- Free Investment Plan to a beneficiary’s tax-free investment, the transfer will be regarded as a contribution and is subject to the annual and lifetime contribution limits of the beneficiary.

Can a TFSA be used as security?

Legislation currently does not allow a TFSA to be used as any form of security.

Important to Note

It remains the investor’s responsibility to monitor their TFSA contributions across all providers and to ensure that they do not exceed the legislated annual and lifetime limits of R33 000 and R500 000 respectively*.

Any excess amounts will be subject to a 40% penalty charge by SARS. Glacier will be responsible to report on all Tax-Free Investment Plans held on their platform to SARS.

Should contributions be received that exceed the maximum prescribed contribution limits, the overcontributions will either be invested in an existing Glacier Investment Plan of the investor or paid back to the investor’s bank account on record. Only the maximum portion allowed will be invested in the Glacier Tax-Free Investment Plan.

Glacier reserves the right to charge an administration fee of up to R250.00 for the reimbursement which will be deducted from the amount before payment to the client.

*Subject to legislation changes
Sanlam Life Insurance is a licensed financial service provider.
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