Tax Free Savings Accounts - White Investments
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Your Questions answered TFSA



If you hate the idea of having to shoulder all the investment risk (downside) while sharing your gains (upside) with the tax man, then a Tax Free Savings Account (TFSA) is for you.

White Investments’ TAX FREE SAVINGS SOLUTION will help you to make the best use of this excellent financial planning tool by providing a comprehensive investment strategy for you to incorporate into your TFSA that is relevant to your goals and life objectives.

Our value for money solution uses low cost product and platform providers to minimise your long term fees which in conjunction with the benefits of tax free returns will allow your wealth to compound at a significantly faster rate.

For more information on TFSA’s and how to make the most of them, please see the Q&A below or download our brochure summarising the offering.



What is a tax free savings account?

Tax Free Savings Accounts (TFSA) were introduced in South Africa in March 2015 as a way of boosting individual savings rates. They are investment accounts that allow South African individuals to save and invest without paying tax on their returns regardless of whether these returns are in the form of interest income, dividends or capital gains. Not only are the returns free from tax during the life of your investment but any withdrawals from these accounts will also be free from tax. This makes them the only truly tax free investments in South Africa and an important tool to be incorporated in any financial planning exercise.

To be very clear upfront, this is not a new type of investment - It is a new type of account within which you can hold your investments. There are few things that you can say with certainty when it comes to your investments. But you can say with absolute certainty that investing within a TFSA rather than a standard discretionary investment account (taxable account) will provide you with superior real returns assuming the same underlying investments.

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What is White Investments' Tax Free Savings Solution?

Our Tax Free Savings Solution is a service we have created to help individuals make the most of their annual tax free savings opportunities within their Tax Free Savings Account (TFSA).

It is a value for money proposition that enables you to set up your long-term strategy in a simple, coherent and cost effective manner. It incorporates low cost product and platform providers to ensure that your investment returns are boosted by lower fees and not just the tax free savings.

The service involves gathering the relevant information required to provide you with an investment solution that will allow you to maximise the benefit that your TFSA can deliver to your wealth creation aspirations.

The Tax Free Savings Solution will:

  • Help you to identify appropriate objectives to target so you can then monitor your progress
  • Help you identify an investment strategy to meet those objectives
  • Provide you with a comprehensive Investment Proposal Document (IPD) which includes a detailed overview of your plan, including investment strategy to follow, product and platform providers to use and full transparency on fees and costs.
  • Assist you in implementing your investment strategy (provided within a period of 3-months post issue of IPD)

IMPORTANT: This is not a guaranteed investment product. Your strategy is likely to incorporate exposure to equity markets and listed property investments which fluctuate in value over time. As with all forms of investment planning, you will need to monitor and potentially adjust your plan during the life of the investment.

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Why do you need to have a formal plan?

Unfortunately our best intentions are frequently not enough to get us over the finish line when it comes to achieving some of our life goals. There are all sorts of distractions and temptations that lead us to lose focus of our main priorities from time to time.

By implementing our Tax Free Savings Solution you can set up a savings and investment strategy that prioritises taking advantage of one of the best types of investment accounts available and requires little month-to-month involvement or activity.

Committing the funds either in lump-sum form upfront or as an ongoing debit order contribution, will help improve your savings discipline and stop this money from being seen as a part of your disposable income.

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How much can I save in a TFSA?

Every south African individual can invest up to R33,000 per year.

That equates to a monthly contribution of R2,750.

These contributions are capped at R500,000 per individual over their lifetime

*Please note that in practice these contribution caps or limits are likely to at least be increased in line with inflation over time – That is to say they will increase at a moderate pace over time.

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Who should own a tax free savings account?


R33,000 per year for some is the equivalent of their lifetime savings and for others it is a mere pittance.

Regardless of your level of wealth any opportunity to pay less tax by incorporating this structure into your overall  investment strategy should be embraced.

In fact the higher your income, the higher your marginal tax rate and the bigger the savings are in this type of account.

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How long should I be thinking of investing for?

Each individual must incorporate this opportunity into their plan in a way that suit's their own specific situation and needs.

However, it is a fact that the longer you can let your money work for you, earning returns that compound year after year, the better off you will be. The real benefit of the tax free concessions will only be felt over the long term as the higher your gains, the higher your potential tax liability and the more advantageous a tax free account will prove to be. Tax Free Savings South Africa The fact that it is going to take some time to accumulate funds in these accounts make them a far better long-term strategic tool.

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What is the main benefit of a TFSA versus a “normal” investment account?

A “normal” account, which we refer to as a direct discretionary account, is fully taxable.

That means interest income (cash and bonds) and income from property investments is taxed at your marginal tax rate.

Dividend income is taxed at source at a rate of 20%.

Any gains in the price of investments that you make over a period longer than 3 years are subject to capital gains tax. This rate is linked to your marginal tax rate at an inclusion rate of 40% (currently).

As the name implies you do not pay any tax when you earn investment returns within a TSFA and you don’t pay tax on your investments when you withdraw money from your TFSA.

In monetary terms if we invested in the exact same strategy (platforms, fund managers, funds) but in the two different accounts, your financial outcome would be significantly different as can be seen below: Tax Free Savings Account South AfricaFor further information, including a practical case study to illustrate the benefits of using a TFSA please see our article entitled "Tax Free Sounds Good to Me"

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Is cash the best investment for a TFSA?

Many people are tempted to invest in cash as a default option as they are unwilling to take on the additional risk in search of higher returns.

Your choice of asset allocation within your TFSA should in the first instance ensure that you are able to meet your objectives rather than your tolerance for risk.

Other considerations to incorporate when thinking of pursuing short term objectives and cash investments in your TFSA:

    • Individuals still have access to an annual interest income allowance of R34,500 (for those over 65) and R23,800 (for those younger than 65). This means at an interest rate of 7% you can save up to R493,000 or R340,000 respectively without having to pay any tax on the income earned.
    • The tax savings benefits are more meaningful over time so saving in these accounts with a short-term time horizon or short-term goal in mind is sub-optimal when seeking to maximise the benefit and efficiency of your overall investment strategy.
    • Cash is not likely to offer returns in excess of inflation over the long-term. This means the purchasing power of your savings will fall over time and you will not be creating wealth.

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Should I set one up for my kids?


If you can contribute to these accounts for your children and make sure that they do not access them until they retire, the magic of compounding will provide a significant boost to their financial well being later on in life.

On top of the explicit benefits of having an investment portfolio, when we teach our children about finances and investing, nothing illustrates the theory better than a real-life practical example that gives them skin-in-the-game.

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Should I use a TFSA to save for my kids education savings?

I would strongly discourage using a tax free account to save for your children’s education despite the many mainstream investment companies encouraging you to do so.

By contributing to your kids TFSA’s you are using their lifetime allowance. Unless you plan on one day giving them the direct ownership/benefit of that allowance, you should leave it open to them.

Using it for school fees means that when you have withdrawn the money to pay for education costs, your children are handicapped by no longer having a tax free allowance to incorporate into their own long-term wealth creation strategy.

Not quite fair is it!

Of course if you plan on using your own allowance to invest for your child's education then you will utilise your own lifetime allowance and not reap the benefit of a tax free portfolio over the long-term.

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Can I access my money once contributed to a TFSA?

Yes, there is the flexibility to make withdrawals from your TFSA. However, it is very important to understand that you will not be able to make additional contributions over and above the annual and lifetime limits.

For example: The lifetime limit for contributions is currently R500,000. You contribute R300,000 over ten years and this grows to R480,000. You then decide to withdraw R250,000 from your account. In the future you will still only be able to contribute an additional R200,000 (R500, 000-R300,000) into the account.

You have essentially handicapped your account from being able to maximise your long-term tax free savings.

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What can I invest in?

You can invest in bank accounts, money market funds, unit trusts (passive and active) and within your stock broking accounts.

There is currently a moratorium on investing directly in stocks or shares so you would not be able to trade your share portfolio within your TFSA. You will however be able to invest in listed exchange traded products within a stock broking account.

The real restriction in terms of available investments may in fact be dictated by the financial services providers that currently offer TFSA’s. Even though these types of accounts were launched by SA Treasury in March 2015, not all financial institutions (Asset Managers, LISP platforms) opted to set up TFSA’s as a part of their offering. Even the RSA Retail Bonds offered by the SA Treasury themselves are currently not available in a TFSA structure.

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What are some practical implications of investment strategies to be used in a TFSA?

Purely from a tax perspective it is far better to have income producing assets in a tax free account. This is simply because the tax you pay on income is likely to be greater than the tax you’d pay on dividends or capital gains.

The bigger your potential tax liability the more you potentially save by having those assets in a tax free account.Tax Free Savings Accounts South Africa

Of course your overall investment strategy should seek to achieve the best returns given your objectives and ability to take on risk in that context. Perhaps if you are saving for your retirement then the investment horizon is 40 years away.... hardly a time horizon that will favour too much exposure to income producing assets like cash and fixed income at this stage.

The way you utilise your tax free savings account is likely to change as times goes on.

If your goal is to invest for the long term then I would say in the initial accumulation phase, as you seek to grow assets in this account, you should consider investment options that are expected to grow your wealth the most over the long-term. In practical terms this is likely to be shares/stocks and listed property investments.

At a much later stage in your life when you perhaps retire you can consider using your tax free savings account for other purposes such as income producing assets.

If you are weighing up your options with respect to opening a TFSA (tax-free) versus some form of retirement savings account (tax-deferred), you may be interested to read an article we wrote entitled "Asset Location". This article goes into some detail about the tax treatment of various types of investments accounts and how to incorporate these into your wealth strategy. 

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Why should I use White Investments’ service for my TFSA?

White Investments’ stated mission is to make a difference. We do this by delivering investment solutions that are single-mindedly focused on helping you achieve your life goals through effective financial planning and management.

We are entirely independent. This ensures that you receive a service focused on delivering results rather than selling you a product.

You benefit from investment experience & expertise that understands smart investing means keeping things simple and cost effective. Perhaps more importantly, we know how to extract those qualities from the industry.

You will receive a service that allows you to maximise your returns and minimise your long term fees, thereby allowing your wealth to compound at a faster rate.

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How much does this service cost?

We are committed to being fully transparent on all fees involved in delivering a service that makes a difference. In order to lower the cost to our clients we have standardised certain services (Including this Tax Free Savings Solution). We are able to do this because the workload involved in each case is similar in nature and this allows us to provide the service in a streamlined manner without unnecessary costs of meetings or excessive individual analysis.

The Tax Free Savings Solution standard flat advice fee is currently R3,640 (4 hours).

This fee includes all work that White Investments conducts to provide you with the initial Investment Proposal Document (IPD).

This fee excludes ongoing administrative platform fees, or underlying fund management fees which you will pay to the service providers we use to implement your strategy. All fees will be highlighted in the Investment Proposal Document (IPD) and full transparency is ensured.

White Investments will help with the initial implementation of the strategy if it is done within a period of 3-months from the date of issuance of the IPD, otherwise a further consultation may be necessary to adjust the figures and update the inputs accordingly.

The initial advice fee covers the work involved in providing you with a strategy and does not include the ongoing monitoring or management of the investment. It is your responsibility to ensure that you make the necessary funds available and monitor the progress of the investment over time. A successful plan will take patience and discipline and White Investments will remain available to consult with at the relevant hourly rate.

If you would prefer to have your plan managed by White Investments on an ongoing basis we will levy an ongoing annual fee calculated as a percentage of assets under management (1% ex VAT) in addition to the stated initial advice fee.

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How do I get started?

Start the process by completing the following APPLICATION FORM and returning along with the relevant application forms and FICA documentation.

By signing the forms you confirm that you accept the initial advice fee and would like to go ahead with the service.

We will follow up with you to confirm the information we have received, clarify any outstanding issues and give you an indication of when you can expect your Investment Proposal Document (IPD).

Please contact us if you still have any outstanding queries or visit our homepage if you would like to find out more about White Investments.

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