A tax-free plan to help you save

In South Africa, debt levels are increasingly taking up more of consumers’ disposable income. Studies have shown that 90 percent of South African consumers are living far beyond their means while barely saving anything. This means should they have a life altering event, retire or need a lump sum of cash later on in life, they would not have access to any savings to support themselves.

“It is well known that general household saving is low. This is further confirmed by South Africa having the lowest savings rate of the BRICS countries,” says Craig Sher, Head of Product Development and Research for Discovery Invest.

National Treasury recently introduced new tax incentives to encourage savings. Responding to this opportunity, Discovery Invest launched the Discovery Tax-Free Flexible Investment Plan which will be available from April this year. This plan provides you with zero tax on their investment growth, thereby providing an attractive vehicle for you to save.

“The new Tax-Free Flexible Investment Plan from Discovery Invest is built on the same low-cost chassis as the existing Discovery Core Flexible Investment Plan. This gives access to a wide range of Discovery Funds as well as externally managed funds, with full flexibility. You can tailor the Tax Free Flexible Investment Plan according to your specific risk profiles and needs” says Sher.

To take part in this Tax-Free Flexible Investment Plan, you can deposit either a once-off lump sum of R30 000 a year or recurring contributions of between R850 and R2 500 per month. Contributions to this type of plan, however, have a legislated limit. While this will be adjusted over time by SARS, an individual will only be allowed to contribute up to R30 000 a year and an overall lifetime amount of R500 000.

The Discovery Tax Free Flexible Investment Plan does not charge any initial fees and only has an annual administration charge of 0.3 percent plus VAT on Discovery Funds and 0.55 percent plus VAT on external funds. Financial advisers can, however, charge initial and ongoing fees in addition to this for financial advice.

Speak to your financial adviser to assist you in building a balanced portfolio according to your particular needs.