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SIMON BROWN: I’m chatting now with Nerina Visser, director at etfSA. Nerina, always appreciate the early morning time. Tomorrow is Budget [Day]. The minister will take money out of our pockets all over the place [in] levies and increases and everything else.
[In] some spaces he might give us money back. Let’s start with the tax-free savings. We have two limits there. The annual limit of R36 000 has been unchanged for five years. Do you think the minister could give us a small jump? I know Old Mutual is saying make it R40 000, please Mr Minister.
NERINA VISSER: [Chuckling] Morning, Simon. I certainly do hope he would do this. It was introduced 11 years ago at an annual limit of R30 000. We were there for two years. It then increased to R33 000 for another three years. It has now been at R36 000 for six years. Come on, come on, we can do this.
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South Africans leave millions in TFSA benefits on the table
Calls for higher tax-free savings limits ahead of budget
Personally, the numerologist in me doesn’t quite like the number 40 for the simple reason that it’s not divisible by 12. I certainly would like to see something that really allows people to do that regular monthly contribution. But R42 000 is too low. I’d say, come on, let’s go for R48 000 or R60 000. That certainly would be a really nice boost.
SIMON BROWN: Hundred percent. R60 000 would be epic. The key thing with this is that it doesn’t cost the minister anything because this is post-tax money. It’ll cost him one day when we take the money out. But there will be no hit to [nothing for] Treasury for the 2026/27 fiscal year.
NERINA VISSER: Simon, the only immediate hit in the current fiscal year would be the lack of dividend withholding tax, and tax on interest. So those do accrue in the current year. But those are relatively small amounts and certainly are not going to dent the fiscus if they allow that. I think a lot more important is that it creates an environment where people are incentivised to save, to invest, to grow their own personal assets so that in future, at that later date, they are less dependent on the state.
The statistics around savings rates in South Africa remain shockingly low, and the relatively small proportion of people who actually have never mind enough in retirement but even any form of retirement savings is really quite alarming. And those all end up ultimately being taken care of by the state. We have more people in South Africa getting grants than there are taxpayers.
So from that perspective if I was to put on my sort of finance minister hat, I would look at that and say, let me incentivise people and see if we can actually reduce that dependency on grants by allowing a relatively modest increase in this tax-free savings limit every year.
SIMON BROWN: I take your point on that. Lifetime limits. It has been half a million since day one. That’s a bit moot, because we’re not yet nudging up against it, but we’re going to be there in a few years’ time, in two or three years where we’re at the half a million. As someone pointed out to me over the weekend, there has been inflation since it was introduced in 2015. Does that ever change? Or does the minister say half a million is all you are going to get?
NERINA VISSER: If we look to the British example – because we got these tax-free savings accounts originally similarly to the ISA, the individual savings accounts that they have in the UK – it was introduced very much on a similar basis, with a relatively modest annual limit, relatively modest annual lifetime contribution limit. These have also been increased quite dramatically.
Currently in the UK that sits at £20 000 per year. For many people, that’s beyond what they could reasonably be expected to invest. So I do think increasing the annual contribution is important, but the lifetime one I think is more of a psychological sort of limit. I often hear people say, oh no, let me not do too much because I’m going to go over my lifetime limit.
And you are right. It is a moot point because we know we are near it and we can’t reach it until our annual allowance actually allows us to get there. It’s going to make absolutely zero difference to the fiscus if the minister increases that to, say, a lifetime limit of a million rand. But it would create a psychological boost in terms of wow, there’s so much more that I can do in this space.
SIMON BROWN: And, to another point, of course take pressure off Treasury when it comes to retirement time.
Regulation 28 limits there are 27.5% or R350 000 – the lesser of those, whichever it is. But here this does reduce tax receipts. It has been unchanged in a decade. I’m thinking we’re not going to see a tweak here.
NERINA VISSER: Probably not. Where we did see a tweak in recent years was when you retire from your retirement savings; the tax-free portion was increased by 10% from R500 000 to R550 000 with some increases in the bands around that as well.
So we did see that relief in terms of the contribution limits. Quite right. Or in our tax-deductible limits, I should rather say. If they do increase that, that will have a specific impact on the fiscus, so that would not be an area that I would look for or expect relief this time around.
I would rather certainly like to see things like, for example, the capital gains tax-free limit, the interest that you can earn because those have not been changed for the longest time. Capital gains tax[-free] limits were last increased to the current R40 000 in 2016, so ten years ago. And the interest – my goodness, that dates back to 2013. So the R23 800 of interest that we can earn, on which we don’t pay tax, has not been increased.
And you are right. Inflation is the one aspect, the nominal value of these percentages that we often throw around. It just means that that bracket creep, that inflation creep and so on have not kept up with it. Again, I do think that is something that would give a great message to savers, to investors and incentivise and encourage people to just save more for themselves.
SIMON BROWN: Yes, it’s that ‘tax by stealth’.
We’ll leave it there. Nerina Visser, director etfSA, always appreciate the insights.
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