UNIT TRUSTS

Weekend Argus (Saturday Edition) - - PERSONAL FINANCE -

Unit trusts are a flex­i­ble in­vest­ment ve­hi­cle, suited to medium-to long-term in­vest­ments, be­cause you have easy ac­cess to your funds.

There are no min­i­mum in­vest­ment pe­ri­ods when you in­vest in a unit trust, and you can make un­lim­ited with­drawals from a unit trust fund, at your dis­cre­tion.

“Depend­ing on the type of fund in which you in­vest, it is con­sid­ered pru­dent to leave your money in­vested for about three to five years to re­coup the in­vest­ment costs and so you can earn a de­cent re­turn,” Ger­rit Viljoen says.

Unit trusts are gov­erned by the Col­lec­tive In­vest­ment Schemes Con­trol Act.

You can cede a unit trust com­pletely or par­tially as se­cu­rity for a loan.

You can­not nom­i­nate a ben­e­fi­ciary on a unit trust in­vest­ment. In the event of your death, the in­vest­ment will be paid into your es­tate.

You pay tax on the in­ter­est you earn. “This can be tax ef­fec­tive be­cause, depend­ing on the type of fund, the in­ter­est earned may well fall be­low your tax ex­emp­tion on in­ter­est,” Viljoen says.

The tax you pay on your re­turns will de­pend on the ap­pli­ca­ble ex­emp­tions and on your mar­ginal tax rate. The ex­emp­tion on in­ter­est in­come for the 2010/11 tax year is R22 300 if you are un­der 65 years old and R32 000 if you are 65 or older.

Any in­crease in the value of the units is taxed as a cap­i­tal gain when you dis­pose of or sell the unit trust. The cap­i­tal gains tax ex­emp­tion for the 2010/11 tax year is R17 500.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.