Laurium offers a wide range of top-quartile performing unit trust funds, many of which are available for tax-free savings. Invest before 28 February 2022 and benefit from every bit of growth from your investment by paying no tax on interest, dividends or capital gains. Individuals may contribute a maximum R36 000 per year and R500 000 over a lifetime.
The example below assumes a monthly debit order of R3 000 a month for 14 years until the lifetime limit of R500 000 is reached. We have then allowed the investment to grow for an additional 11 years, completing a 25-year investment period. The investment return assumes a return of CPI +5% per annum, which is the benchmark of the Laurium Flexible Prescient Fund. (The Laurium Flexible Prescient Fund has beaten CPI +5 by 1.6% per year since inception 1 February 2013 to 31 October 2021). A personal tax rate of 45% has been assumed. Please note that these values are for illustrative purposes only and are not guaranteed.
Your investment after 25 years would be worth R3 249 1261, but only worth R2 012 039 after tax if you had not been in a taxfree savings account.
This cumulative sum is a combination of the following:
• Tax saved: R1 237 122 (tax you would have paid if it was invested in a taxable account)
• Cumulative growth had the investment been taxed: R1 512 039
• Cumulative contribution: R500 000 (your amount invested over the 14 years).
Summary of Unit Trusts managed by Laurium that are offered as tax-fee savings accounts – these can be accessed directly via our website (www.lauriumcapital.com).
There are some caveats to TFSA accounts; however, these have been put in place to encourage individuals to stay invested and invest as soon as possible:
• There is no carry-over of your annual allowance into the following year. By way of example, if one did not make any TFSA investment in the tax year ending 28 February 2020, they could not carry the allowance into the 2021 tax year. You remain limited to R36 000 per annum until reaching the lifetime limit of R500 000.
• Any withdrawals made from a TFSA cannot be replenished. If you choose to withdraw R100 000 from your existing TFSA account, your overall lifetime limit will then drop from R500 000 to R400 000.
• Contributing in excess of the annual R36 000 and lifetime limit of R500 000 will result in tax penalties.
There are several incentives to use a Tax-Free Savings Account:
• For younger investors, a TFSA allows one to invest tax effectively in a liquid investment vehicle towards a future event. This may include buying a house or affording a wedding.
• Unlike retirement savings, TFSA is not subject to Regulation 28, allowing one to invest more aggressively in equities or at higher offshore exposures than the 30% offshore plus 10% in Africa.
• Should one’s investment strategy or objective change, switches between TFSA unit trusts may be made without triggering a CGT event (introduced in 1 March 2018). There is no limit on the number of tax-free accounts one can have.
• Down the line, in retirement, drawing down on one’s TFSA account can be used to offset the withdrawals needed from a living annuity. This will result in an overall tax saving until the TFSA is depleted.
The eighth wonder of the world, compounding, is on offer, tax-free. Make sure you take advantage of this opportunity and invest today!
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