Can I trans­fer my tax-free sav­ings ac­count?

CityPress - - Business -

Rama writes:

I have a debit or­der of R350 per month that goes into a tax-free sav­ings ac­count (TFSA), as well as ad hoc pay­ments when ex­tra money is avail­able. The fees I am pay­ing are much higher than TFSAs pro­vided by 22seven or EasyEquities, for ex­am­ple.

Can I trans­fer to these less ex­pen­sive op­tions and still keep my con­tri­bu­tions ring-fenced as taxfree?

City Press replies:

Our in­ves­ti­ga­tions found that there is still some con­fu­sion around the trans­fer sta­tus of TFSAs.

While it was en­vis­aged that trans­fers would be able to take place from March 1, Trea­sury has informed City Press that the fi­nal reg­u­la­tions have not yet been passed, but that it hopes to do so within the next few weeks.

It would still take the in­dus­try about six months af­ter the is­su­ing of the reg­u­la­tions to put the nec­es­sary mech­a­nisms in place.

Trea­sury made it clear that only di­rect trans­fers be­tween prod­uct providers would be con­sid­ered as a le­git­i­mate trans­fer.

Un­til the mech­a­nisms are in place, the best course would be to open a new TFSA with the lower cost provider and trans­fer your monthly debit or­der and fu­ture con­tri­bu­tions to the new ac­count, but to leave your ex­ist­ing funds in place un­til there is cer­tainty around the mech­a­nism to trans­fer.

Once the mech­a­nisms are in place, you can trans­fer the bal­ance to your new fund.

You do not want to be in a po­si­tion where you with­draw your money with the in­ten­tion of trans­fer­ring to a new prod­uct provider only to dis­cover that it has re­duced your life­time sav­ings limit.

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