Secondary

Tax

Imminent changes to tax-free savings regulations

The National Treasury will shortly publish final amendments to tax free savings accounts regulations for the year beginning 1 March 2017. The amendments will include:

  • The process for transfers
  • clarify the policy position on performance fees in underlying funds
  • give guidance on the adequate and consistent disclosure of returns to fixed deposit tax free savings accounts
  • include various provisions to enable the regulator to adequately oversee product offerings
  • align the rules of access for fixed deposits and
  • include Postbank as a product provider.

The ability of investors to transfer will be postponed to 1 March 2018 to allow product providers sufficient time to prepare for more onerous responsibilities in assisting investors to comply with the annual and lifetime limits.

Product providers’ responsibility re limits

The annual and lifetime limits apply to the combined contributions to an investor’s tax free savings accounts across all product providers. Investors are required to manage their own limits across their different tax free savings accounts. However, individual product providers may not accept contributions that exceed the annual and lifetime contribution limits for any investor in respect of accounts held with that particular provider.

When transfers are introduced, product providers will be required to monitor the level of contributions already made by the investor to a previous product provider and restrict the investor from making further contributions if they were to exceed the annual or lifetime limits.

Performance fees

Performance fees are not permitted in tax free savings accounts whether charged as part of the tax free savings account or in an underlying fund into which tax free savings account contributions are invested. Product providers must ensure that tax free savings accounts do not, in any way, contain fees that are performance based.

New products

Product providers will be required to notify the Financial Services Board (FSB) within a calendar month before a new tax free savings account product is advertised in the market, providing the FSB an opportunity to review the features of the offering and suggest changes to the rules if necessary. If no response is received, product providers may proceed to advertise the investment as planned. The Regulations require that any change undertaken subsequently to the launching of the product should also be submitted to the FSB in the same manner.

Click here to read the full media release from National Treasury.

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