I currently have a tax-free fixed deposit account with Investec. This product was taken out in 2016. I have been contributing the maximum allowable annual limit since then. Currently 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 they have been introduced in South Africa.
The decision to transfer the Tax-Free fixed deposit to a Tax-Free Investment Account is a good idea, as Tax Free Savings Account should be utilised as long-term savings vehicle, therefore allocation into a Tax-Free Savings Investment account is more appropriate.
The Tax-Free Fixed deposit account that you are currently exposed to is held in cash. There is currently not tax savings as you are currently not exceeding the R23 800 interest income for person younger than 65 and R34 500 for person older than 65, therefore there is no tax savings.
If you are looking for a low-cost Tax-Free Savings investment Account, then you should consider the one that is in the form of an exchange traded funds (ETF).
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.