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How Tax-free Savings Accounts Work

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

Contributions to a tax-free savings account are made from post-tax income.

Any interest, dividends or capital gains will be tax free. This means that you don't pay tax on the growth on your investment. No tax is payable on withdrawals.

National Treasury has put limits on the amount you can save in a tax-free savings account. The total annual contribution in a tax year may not exceed the annual contribution limit, which is currently R30 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 savings accounts (at Sanlam or other providers).

The effect of compound interest, or earning investment return on investment return, is increased in a tax-free savings account due to the tax relief on the investment return. The longer you invest the more benefit you will get.

There will be tax penalties if you invest more than the annual contribution limit stipulated by National Treasury. To avoid penalties, make sure that your annual payments across all approved tax-free savings accounts (at Sanlam or other providers) stay below these limits.

You will need to submit the IT3(s) statements provided by Sanlam or other providers to SARS with your annual tax return. If you provide Sanlam with your tax number, we will submit the information to SARS electronically as well.

The South African tax year runs from 1 March to 28 February of the next year.

Yes, you can apply for a Sanlam Tax-free Investment on behalf of your child or other family member, but keep in mind that you will be using part of their tax-free allowance, which may limit their ability to save for themselves via this type of product later. Be careful of donations tax, if applicable.

A tax-free savings account can only be opened for an individual. You can open one for each individual in a family, but cannot open one in the name of a trust or a company.

Sanlam’s Tax-free Investment Offering

The Sanlam Tax-free Investment offers low fees and discounted investment management fees making it a competitive and cost-effective savings choice. As Wealthsmiths, we are dedicated to improving the savings culture in the country.

Minimum payment
The Core plan has a minimum payment of R250 per month, while the Comprehensive plan has a minimum of R500 per month.

Investment choice
The Core plan invests in the Satrix Life Time Investment Option for Tax-free Investments. The Comprehensive plan offers the flagship Sanlam Unit Trust funds and qualifying funds from other leading fund managers.

You can make monthly or one-off payments into a Sanlam Tax-free Investment. The payments in any tax year are limited to the annual contribution limit in that year. This is currently R30 000 per year. The total lifetime contribution limit is R500 000. If you go above these limits you will incur tax penalties.

If you choose to make monthly payments, you can pay the following:

  • Between R250 and R2 500 on the Core plan
  • Between R500 and R2 500 on the Comprehensive plan.

If you start with a one-off payment, you can pay

  • Between R10 000 and R30 000 on the Core plan
  • Between R15 000 and R30 000 on the Comprehensive plan.

You can add additional one-off payments of between R2 500 and R30 000 in future, as long as your total payment in the tax year does not exceed the annual contribution limit.

The maximums above will be adjusted if the annual contribution limit is changed.

No, but you should decide upfront how long you plan to invest, as your fund allocation needs to be appropriate for your expected investment term. We use the expected investment term to manage the Life Time Investment Option on Core plans, and to determine the default fund on Comprehensive plans. It is important that you adjust the expected investment term on a Core plan or review the underlying funds on a Comprehensive plan if your expected investment term changes.

The effect of compound interest, or earning investment return on investment return, is increased in a tax-free savings account due to the tax relief on the investment return. The longer you invest the more benefit you will get. We have a minimum investment term of five years for both Core and Comprehensive plans, so that you benefit from the tax relief and get value for money.

Social groups allow clients to reduce the administration charge on their Sanlam Tax-free Investments by encouraging friends and family to take out their own Sanlam Tax-free Investments over time and join their social group. The administration charge for all clients within a social group will be calculated based on the combined fund value of the whole group. Members of a social group can buy either the Core or Comprehensive plan.

Clients buying the Sanlam Tax-free Investment online will be contacted before the end of their first plan year to take advantage of this benefit.

Yes, you will need to provide proof of identity and your residential address if you make recurring payments of R25 000 or more per year, which is R2 083 or more per month.

If this is required, one of our call centre agents will call you to make the necessary arrangements.

Fees and Charges

The current charges for the Sanlam Tax-free Investment consist of the administration charge plus the asset management and other direct investment charges. The current charges are:

Administration charge
This is equal to a percentage of the fund value and a minimum of R25 on the Core plan and R40 on the Comprehensive plan per month. This will be adjusted yearly to allow for inflation. The percentage used is a linear interpolation of the percentages in the table below, based on your current fund value.

Fund Value

Fund size range Yearly marketing and administration charge % of the fund value of the plan
0 1.45
R1 000 000 and thereafter 0.20

Asset management and other direct investment charges
The asset managers include the asset management charge when setting the unit prices for the investment funds. The charge is a percentage of each plan's part of the market value of the assets in the investment fund.

For a Core plan the asset management charge is 0.29% per year. For a Comprehensive plan the asset management charge is the weighted average of the asset management charges of the selected investment funds. The value of the asset management charge for each of the available investment funds is shown in the fund fact sheet for that fund - View Fund Fact Sheets

There will be no transaction charge for any of the following:

  • Reducing or stopping of a recurring payment
  • Withdrawals from the plan
  • Terminating the plan

You will be charged R300 to change from a Core plan to a Comprehensive plan.

Making Payments into a Tax-free Investment

Recurring payments into the Sanlam Tax-free Investment are payable by debit order.

One-off payments at the start of the plan are also payable by debit order. One-off payments made during the lifetime of the plan may be paid by debit order or cash. The Sanlam Client Contact Centre will give you a cash reference number when you arrange for an extra one-off payment made in cash.

You need to select the date you want the first payment to be taken off your bank account. If it is not possible to take off the first payment on this date, we will take it off one month later.

All payments are due on the same day of the month as the date selected for the first payment, or the first working day thereafter if the due date is not a working day.

Select the date for the first payment to fall on or just after your salary payment date, to make sure that you have enough funds available.

You can choose your monthly payments to remain the same or increase yearly on the plan's anniversary. Payments can increase at a fixed rate or at the Sanlam inflation rate. Sanlam will limit the annual payment increase to make sure that your payments in a tax year do not exceed the annual contribution limit.

Yes, you can add one-off payments at any time after your plan has been issued. The minimum additional one-off payment is R2 500 for both Core and Comprehensive plans. Please call the Sanlam Client Contact Centre at 021 916 5000 or 0860 SANLAM (0860 726 526), or send an email to life@sanlam.co.za.

The recurring payment can be increased, reduced or stopped. Contact the Sanlam Client Contact Centre at 021 916 5000 or 0860 SANLAM (0860 726 526), or send an e-mail to life@sanlam.co.za.

  • The minimum increase amount is R250 per month
  • If you reduce the payment, it cannot be less than the minimum payment for a new plan at that time. This is currently R250 per month for a Core plan and R500 per month for a Comprehensive plan
  • The recurring payment may only be stopped if the remaining fund value of the plan will be at least R70. If not, the plan will lapse

The plan starts on the date that the first payment is paid. If we cannot collect the first payment on your preferred start date, we will collect the first payment one month later and move the start date in line with this.

The Sanlam inflation rate is calculated considering the change in the consumer price index, or any other commonly accepted method of measuring inflation that may apply at the time. The Sanlam inflation rate may differ from published inflation rates due to differences in calculation methods. A minimum rate applies, which may change from time to time.

Investment Options

In a Core plan, your money is invested in the Satrix Life Time Investment Option for Tax-free Investments.

This option invests in the Satrix Balanced Index Fund and the Satrix Low Equity Balanced Index Fund. We manage the allocation to these funds on your behalf. If the investment term is longer than 10 years, all funds are initially invested in the Satrix Balanced Index Fund. This fund is moderately aggressive and can have a fair amount of fluctuations in short-term returns, in anticipation of a higher real return over the long term. If the remaining expected investment term is less than 10 years, the funds are gradually switched to the Satrix Low Equity Balanced Index Fund, a fund with more stable investment returns. Both of these funds are passively managed funds, tracking a basket of indices.

In a Comprehensive plan, we offer a range of top quality qualifying investment funds. You can choose up to five funds at first, and can switch between these funds at any time. The first four switches in any plan year are free. You can get more information on the available funds in their fund fact sheets.

In the Satrix Life Time Investment Option for Tax-free Investments we manage your investment on your behalf. This option invests in the Satrix Balanced Index Fund and the Satrix Low Equity Balanced Index Fund. Both of these funds are passively managed funds, tracking a basket of indices. The allocation to these funds is based on the expected investment term.

If the expected investment term is longer than 10 years, all funds are invested in the Satrix Balanced Index Fund. This fund is moderately aggressive and can have a fair amount of fluctuations in short-term returns, in anticipation of higher real return over the long term.

From ten years before the end of your expected investment term, 2.5% of your investment is switched to the Satrix Low Equity Balanced Index Fund every quarter, a fund with more stable investment returns.

If your expected investment term at the start of the plan is shorter than 10 years, your investment is allocated to both the funds. For example, if your expected investment term is five years, 50% of your investment will be allocated to each of the funds.

It is important that you adjust your plan if your expected investment term changes. This will ensure that your investment is allocated appropriately. Contact the Sanlam Client Contact Centre on 021 916 5000 or 0860 SANLAM (726 526), or send an e-mail to life@sanlam.co.za.

Satrix

Vertical axis = Fund allocation
Horizontal axis = Remaining term

On a Comprehensive plan you can switch your investment funds at any time. You have four free switches per plan year. Thereafter a switching fee of R600 will be charged per switch.

On a Core plan, your funds are invested in the Satrix Lifetime Investment Option for Tax-free Investments. We manage your investment on your behalf. We will gradually switch your funds to a more stable investment. All of these switches are free.

We invest your full payment in the underlying investment funds by buying units in each of these funds. The unit prices of the investment funds are not guaranteed, and may increase or decrease over time.

The total fund value of the plan is equal to the sum of the values of the underlying investment funds. The fund value for each investment fund is equal to the number of units you have in the fund multiplied by the unit price at the calculation date.

Investment funds can invest in multiple asset classes or a single asset class. For funds with a single asset class, the fund mandate describes the asset class (e.g. equity, cash or property). For funds with multiple asset classes, the fund mandate describes the investment risk profile (e.g. cautious, moderate or aggressive):

CONSERVATIVE: Conservative investments provide modest returns with a high degree of capital security. A typical portfolio will consist primarily of income orientated asset classes such as cash, bonds and property, with very little exposure to equities. The expected return may be close to inflation. There is therefore a risk that the real value of an investment may reduce over time, after taking fees and taxes into consideration.

CAUTIOUS: Cautious investments provide stable returns with limited risk of capital loss. A typical portfolio will consist primarily of income orientated asset classes such as cash, bonds and property, with limited exposure to equities.

MODERATE: Moderate investments should generate real returns by outperforming inflation over the longer term, but will at times experience short-term negative returns. A typical portfolio is diversified over all major asset classes to provide a balance between risk and return. There is a moderate risk of capital losses in the short term.

MODERATELY AGGRESSIVE: Moderately aggressive investments can have a fair amount of fluctuations in the short-term returns, in anticipation of higher real returns over the long -term. A typical portfolio is diversified over all major asset classes, with a bias towards equities to create real capital growth over the long term. There is a substantial risk of capital losses in the short -term.

AGGRESSIVE: Aggressive investments aims to maximise real return over the long term, but may experience severe short-term negative returns. A typical portfolio is diversified over all major asset classes, with a strong bias towards equities in order to significantly outperform inflation over the long term. There is a significant risk of capital losses in the short term.

Multi-asset class funds offer exposure to various asset classes including cash, equity, bonds and property. In a passively managed multi-asset class fund each underlying asset class tracks the return of its respective index. For example, in the SATRIX Balanced Index Fund the property exposure is managed to deliver the performance of the FTSE/JSE SA Listed Property Index (J253). The composite index simply combines the underlying indices, each with a specified weight.

A passive or index-tracking fund is used to follow the performance of a specified underlying index as closely as possible. An index is a grouping of shares or other securities. Indices can be constructed to represent the overall market or a specific sector or theme. This makes it possible for individual investors to obtain the performance of an index.

Satrix funds are managed by full replication, which means the fund will hold exactly the same underlying securities as the index, in exactly the same weights. Any changes that are applied to the index will also be applied to the index-tracking fund.

Passive management is an investment strategy based on tracking an underlying index, with the aim of delivering performance as close to that of the index as possible. An index-tracking fund is therefore constructed to match the specified index.

Actively managed funds are constructed to differ from the index that is used as their benchmark. Following rigorous company analysis, active managers make specific investment decisions with the aim of constructing a fund that outperforms the relevant benchmark. The outcome of these investment decisions will determine whether the active fund performs better or worse than the index.

The fees associated with active management are higher than those associated with passive management.

Savings Group

It’s a saving incentive unique to Sanlam. The more people who join a particular savings group, the lower the administration charge percentage on their plans.

In each savings group the administration charge percentage is calculated based on the combined fund value of all the plans in the group. The bigger the combined fund value, the lower the administration charge percentage for each plan in the group. The lower administration charge percentage is used to calculate the administration charge for each of the plans in the savings group, which is subject to a rand minimum per plan.

For example: Joan opens a tax-free savings account with Sanlam and receives a savings group number. Joan decides to share her number with friends and encourage them also to open tax-free savings accounts with the same savings group number. The administration charge percentages are based on the combined value of the group’s savings, which means they’re much lower for Joan and all her friends.

In short: as the number of people in a particular savings group increases, the administration charge declines, subject to the rand minimum.

Savings groups allow clients to significantly reduce the administration charge on their Sanlam Tax-free Investments over the investment term.

The administration charge percentage of the plans in a savings group is based on the combined fund value of all the plans in the group, rather than that of the individual plans. The more plans in a savings group, the lower the administration charge percentage for everyone in that group.

The graph below shows how the administration charge percentage reduces as the combined fund value increases. For example, for a combined fund value of R250 000, the administration charge percentage is 1.14%.

Satrix

When you invest in a Sanlam Tax-free Investment, you can either set up a new savings group or join an existing savings group. To create a new code you can get it on www.sanlam.co.za while applying for a Sanlam Tax-free Investment or by contacting the Sanlam Client Care Centre on (021)916-5000 or 0860 726 526(SANLAM) or sending an e-mail to life@sanlam.co.za

If you want to join an existing group, you will need the code of that savings group.

You can invite others by using the functionality on www.sanlam.co.za (they will get an email with your savings group number that explains the benefits of joining a savings group) or just give them your savings group number. They can use your savings group number when buying a new Sanlam Tax-free Investment or add it to an existing Sanlam Tax-free Investment.

You can change your savings group by calling the Sanlam Client Care Centre on (021)916-5000 or 0860 726 526(SANLAM) or sending an e-mail to life@sanlam.co.za.

Your personal and plan details will not be made available to the other members of your savings group. You can join a savings group with complete anonymity. If you go to www.taxfreesavings.co.za you can retrieve information about any existing savings group. We will only show the number of plans in a savings group and the total fund value of the group (for groups with more than 3 plans). Clients will therefore be able to track how their savings group is growing.

Savings groups are a unique concept developed by Sanlam to encourage South-Africans to save more. Clients will have the ability to invite friends and family to join their savings group, which will not only get more people to save, but will also increase the value of all of their savings.

The savings group is a unique feature that is only available on Sanlam Tax-free Investments.

Where can I get information about a savings group? If you go to www.taxfreesavings.co.za you can retrieve information about any existing savings group. This will show the number of plans already in the savings group, as well as the total current fund value.

You can see your savings group number on the plan documents or by contacting the Sanlam Client Care Centre on (021)916-5000 or 0860 726 526(SANLAM) or sending an e-mail to life@sanlam.co.za

You can get it on www.sanlam.co.za while applying for a Sanlam Tax-free Investment or by contacting the Sanlam Client Care Centre on (021)916-5000 or 0860 726 526(SANLAM) or sending an e-mail to life@sanlam.co.za.

The administration charge percentage is linked to the size of the fund. If a group member leaves or reduce payment the fund value of the group will reduce or grow at a slower pace than before.

Yes, a savings group can consist of one plan. You can recruit friends and family at any point in time to your savings group.

You can change your savings group whenever and how often you want.

No, Sanlam is using this initiative to encourage more people to save

Each plan can only belong to one savings group. If you have more than one Sanlam Tax-free Investment, they could be in the same or in different savings groups.

Your annual Sanlam Benefit Statement will provide information about your Sanlam Tax-free Investment, including your Savings Group number, the number of active plans in your savings group and the combined fund value.

Account Information

After the start date of your plan, you can get information on Sanlam Secure Services. You can register using your plan number by going to the Secure Services link under Login on www.sanlam.co.za. Alternatively, you can contact the Sanlam Client Contact Centre at 021 916 5000 or 0860 SANLAM (0860 726 526), or send an email to life@sanlam.co.za.

Click on the Login icon (top right-hand corner of this page). Select the Secure Services link on the Login menu. You can use your plan number to register for Secure Services.

Click on the Login icon (top right-hand corner of this page). Select the Secure Services link on the Login menu. You can use your plan number to register for Secure Services.

Once your application has been processed, you will have 30 days in which to examine the contract documents and decide whether you wish to continue with the plan.

If the plan does not meet your needs, and if you have not made any changes to it, you can cancel it by letting us know in writing during this period. We will refund any payments you have already made. If the assets in which the payments were invested have decreased in value, or if you have already received benefits from the plan, we will reduce the amount to be refunded to you in line with this.

If you need further information on your Sanlam Tax-free Investment please phone our Client Contact Centre on 021 916 5000 or 0860 SANLAM (0860 726 526), or send us an email at life@sanlam.co.za. Our Compliance department can be contacted at the same number.

When you get advice from a registered financial planner, and buy a product through that broker or advisor, you are protected under the Financial Advisory and Intermediary Services (FAIS) Act of 2002. This means that if you are not satisfied with the advice you received and the manner in which we responded to a complaint you may have had, you can submit a formal complaint to the FAIS Ombud.

If you purchase a financial product directly from a product provider without the help of a broker or advisor, you take full responsibility for your decisions.

You can contact a Sanlam financial planner to get advice on your fund choice. You can add a fee for advice to your existing Comprehensive plan. Contact the Sanlam Client Contact Centre at 021 916 5000 or 0860 SANLAM (0860 726 526), or send an e-mail to life@sanlam.co.za. Alternatively, you can submit an enquiry/request online at: www.sanlam.co.za/contact/getadvice/Pages/default.aspx

If you provide Sanlam with your tax number, Sanlam will submit your information electronically to SARS. This will make it easier to complete your annual tax return.

Contact the Sanlam Client Contact Centre on 021 916 5000 or 0860 SANLAM (0860 726 526) or send an e-mail to life@sanlam.co.za.

You will need your plan number, the beneficiary’s full names, ID number, and the percentage of the benefit that you wish to allocate.

Sanlam Tax-free Investment: Withdrawals and Submitting a Claim

You can withdraw money at any time. No fees will be charged for withdrawals.

Any re-investment will count towards your total tax-free savings payments, which are limited to R500 000 over your lifetime. Withdrawing funds may prevent you from reaching your savings goals.

The effect of compound interest, or earning investment return on investment return, is increased in a tax-free savings account due to the tax relief on the investment return. The longer you invest the more benefit you will get.

No, but you can withdraw a part or all of your investment if you need access to the funds.

Yes, once the fund value on a Comprehensive plan has reached a specific minimum (currently R40 000) you can ask for a monthly income to be paid from your plan.

You cannot take income while making recurring payments.

You cannot take income from a Core plan.

The fund value on the date we are notified of your death will be paid to the beneficiaries on the plan or to your estate, if no beneficiaries were appointed.

Beneficiaries will receive the proceeds tax free, and can choose to take out a new tax-free investment if they want to continue investing in this product.

In the event of a claim, please tell us as soon as possible. To get the necessary claim forms and to make sure that all the required information is supplied, contact the Sanlam Life Claims Call Centre at 021 916 1710.

Depending on the nature of the claim, certain documents (e.g. a death certificate) may be required.