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Investment Strategy
Friday, April 10, 2015 - 02:16
Sooner the better

Following the introduction of the new tax free savings legislation, Old Mutual says it has launched “a very attractive savings plan”. Called the Old Mutual Invest Tax Free Plan, it gives customers tax free growth with flexible investment choices and no access restrictions.

Richard Treagus, General Manager of Savings and Investments at Old Mutual Emerging Markets, says the new legislation initiated by National Treasury should be welcomed by all South Africans. “We know from the findings of the 2014 Old Mutual Savings and Investment Monitor that South Africans do not save enough, even though as many as 80% of respondents indicated they were keen to learn how to save. The good news for them is that the new tax free savings regulations will make it easier, simpler and more attractive to save.”
The chief incentive to save through a tax free savings account is that the growth on your savings, whether in the form of interest, dividends or capital gains, will not be taxed, maximising the opportunity for compounding growth.
Old Mutual’s new savings plan includes these benefits:

  • A range of funds from top asset managers;
  • Very low administration fees (only 0.5% p.a. for investors in Old Mutual funds);
  • In addition, if you save R30 000 a year (the maximum annual allowance) you will get half of your admin fees back (0.25% of the investment value per year);
  • Start saving from as little as R350 a month or with a lump sum investment of R5 000;
  • Feel free to access your savings, or change your premiums without any extra charges or penalties;
  • From the end of March, enjoy the convenience of easily opening an account from start to finish online;
  • Nominate beneficiaries and avoid estate process delays and executor fees;
  • Protection from creditors in the event of insolvency.

Treagus explains that the Old Mutual Invest Tax Free Plan offers all the advantages associated with collective investment schemes (providing access to a range of unit trusts from leading asset managers) with additional advantages made possible by offering the product in a life wrapper and using Old Mutual’s diverse investment capabilities.
He adds that Old Mutual cautions savers against frequently accessing their accumulated savings. “Although tax free savings accounts allow you access to your savings at any time, we urge our customers to build up funds over the long term and maximise the tax advantage. The legislation means that there is a ‘Use it or Lose it’ opportunity each year and if you disinvest funds you cannot reinvest them in excess of the R30 000 limit for that year,” he says.
In line with the age-old adage that ‘it’s time in the market that counts’, customers should rather try and build up the savings in their tax free savings plan over the long term to gain the significant impact of tax free compound growth.
“For this reason it’s also true that the sooner you start to save, the better.”

Further details about Old Mutual’s offering

The Old Mutual Invest Tax Free Plan is flexible in that it allows for both regular investments and lump sum investments.
Within the Tax Free Plan, customers choose their underlying investment funds from our range of funds that cover different investment objectives (from low risk funds to medium and high risk funds). “These are in the form of unit trust and life funds that have exposure to equity, property, bonds and money markets,” explains Treagus. The unit trust funds are managed by Old Mutual and other leading fund managers. “We also offer a special range of low-cost tracker funds for customers who want passive investment options. Our flagship tracker fund will track the JSE Top 40 index with an asset management fee of only 0.20% per year.
“Our administration fee is structured such that it is 0.75% of investment value per year, but reduces to 0.50% if the customer chooses to use the Old Mutual funds. We also cut it further to 0.25% if you contribute the full R30 000 in a tax year. These fees exclude any advice fees, which are negotiable between the customer and the financial adviser or broker if the product is bought via a financial adviser.”
The minimum regular investment is R350 per month. The minimum lump sum investment is R5 000. If you want to make any ad hoc top ups to your existing investment, the minimum is R1 000 per top up.
“We have also designed our Tax Free Plan so that you are able to nominate beneficiaries. This means that in the event of death the pay-out of the proceeds won’t have to go through the delays of the estate process. You also avoid paying executor fees.”
The asset management fee on our Old Mutual Top 40 Tracker Life fund is the lowest in the industry at 0.20% a year.
For further information please call 0860 60 60 60 or speak to your Old Mutual financial adviser or broker.

Copyright © Insurance Times and Investments® Vol:28.4 1st April, 2015
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