Make Tax-Free Savings Work For You In These Uncertain Times

22 February 2022

With the global COVID-19 pandemic heading into its third year, tightening financial pressures and the need for improved financial security remain top-of-mind for many South Africans battling to come to terms with an uncertain future. 

"Now is the time to maximise savings in order to mitigate against the financial and economic uncertainties which lie ahead, given that the pandemic shows little sign of abating in the short-term. People should be encouraged to utilise tax-free investment vehicles as an exceptional way to save effectively," Al Baraka Bank's General Manager: Retail and Wealth, Mr Nasir Seedat, said recently. 

Al Baraka Bank supports the Government's efforts to promote an improved savings culture in South Africa through tax-free investment - a savings vehicle introduced several years ago. 

Mr Seedat said: "With the tax year-end imminent, now is the ideal time to employ tax-free savings mechanisms. Optimising savings in the face of present uncertainties, job concerns and the continuance in many instances of salary reductions, is absolutely crucial in creating a degree of financial security and an improved sense of well-being." 

Tax-free investment offerings enable people to enjoy the benefit of paying no tax on earnings, regardless of the investment period. Investors are freed from paying income tax on the returns from their tax-free investment accounts and may invest up to R36 000 per tax-year and to a lifetime limit of R500 000.  

Exceeding the prescribed limits will, however, result in penalties. 

Mr Seedat stressed: "This country has a history of incredibly poor levels of saving; a situation which has become markedly worse as the economic effects of the pandemic have tightened their grip on every level of society since March 2020. It is no longer viable to 'live-for-today,' as the prolonged nature of the health crisis could result in increased levels of debt or, worse, financial ruin for those without the back-up of savings.   

"We, at Al Baraka Bank are intent on communicating with and enlightening people in an effort to contribute towards revising the South African society mindset. We actively encourage people to devise, implement and maintain a sustained savings programme, setting aside funds for use when the going becomes really tough," he said. 

He indicated that a minimum initial deposit of just R1 000 was required to open a tax-free savings account and the minimum top-up deposit level thereafter is R250. 

"This is an affordable method to join the fast-track to excellent tax-free savings for a safer financial future and an ideal way to grow wealth effectively for financial security in the face of the uncertainties challenging us. In addition, tax-free savings investment options provide the perfect means to encourage our young people to adopt a savings culture at an early age, making it a sustainable habit and promoting a keen sense of self-discipline." 

"The bottom line is that we all need to think about becoming more financially responsible and now is the perfect time to think tax-free," Mr Seedat concluded.