NEARLY 460 000 ACCOUNTS OPENED SINCE MARCH 2015, AND INVESTMENTS NOW TOTAL OVER R5 BILLION
year’s Budget to R33 000. The lifetime limit remains R500 000.
There are four main vehicles in which you can invest: bank accounts, unit trust funds, stockbroker accounts that include share portfolios and exchange traded funds (ETFs), and life assurance products such as endowment policies. For the purposes of the survey, ETFs were classified under stockbroker accounts and not under collective investment schemes, which reflect only investments in unit trust funds (see graphic).
The survey shows that the bulk of the money in TFSAs (40.7%) is in bank savings accounts, with 26.5% in life products, 20.9% in unit trust funds and 11.9% in stockbroker accounts.
This was a point of concern among some respondents, who pointed out that bank-account TFSAs are not ideal as long-term investments, because they yield low returns over the long term that are unlikely to beat inflation. They also said banks have an advantage in that they have an extensive client base they can mine for marketing tax-free accounts, and they have those clients’ Fica details on hand, making it far easier for the clients to open TFSAs. Furthermore, they say, there is a tax exemption for interest earned on cash savings, subject to limits that would easily accommodate savings in a TFSA, thereby defeating the object of using a TFSA.
However, the asset-class breakdown shows that although assets in cash rose from R1.297bn in 2016 to R2.398bn in 2017 (a difference of R1.101bn), assets in listed shares (equities) rose from R935 million to R2.051bn (a difference of R1.116bn). Looked at another way, the proportion of assets held in cash fell from to just over 47% from 51% in 2016, while assets in equities rose from 36% to 40%.This suggests that more investors are opening accounts more appropriate for longterm growth.
In a recent interview on radio station ClassicFM, Intellidex general manager Colin Anthony said the numbers were encouraging, particularly the high percentage of first-time savers, which shows that TFSAs are having the desired goal of making inroads into the target market of people who have not saved before.
Anthony said financial services providers have made their TFSAs attractive in terms of their low costs, but the initiative still needs a concerted education campaign directed at the target market.
martin.hesse@inl.co.za