I currently have a tax-free fixed deposit account with Investec, which I opened in 2016. I have been contributing the maximum allowable annual limit since then. The amount in the fixed deposit is approximately R200 000. It matures in March 2021. Due to the current low-interest cycle, I want to convert this tax-free fixed deposit to a tax-free investment account. Can you advise on a suitable product (decent returns with low fees)? Any other considerations in this regard?
It is good to see that you have been taking advantage of the tax-free savings account since the product was introduced in South Africa.
The decision to transfer your tax-free fixed deposit to a tax-free investment account is a good idea, as a tax-free savings account should be utilised as a long-term savings vehicle, and therefore an allocation into a tax-free investment account is more appropriate.
The tax-free fixed deposit account that you are invested in is held in cash. Presently, you receive no tax savings as you are not exceeding the R23 800 annual interest exemption for persons younger than 65 (or R34 500 for persons older than 65).
If you are looking for a low-cost tax-free investment account, you should consider the one in the form of an exchange traded fund (ETF).
Benefits of such an account include:
When doing the transfer:
I wish you all the best in your investment journey, and may it yield great results.
This reader question was published on Moneyweb.