Budget speech: Calls for increase in lifetime contribution limit for TFIs

Budget speech: Calls for increase in lifetime contribution limit for TFIs

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  • By not being able to ‘replace’ the funds that an investor has withdrawn, they reduce their remaining allowance within the R500 000 lifetime limit

Asset Manager, Nedgroup Investments is calling for an increase on the lifetime limit for TFIs, which is currently R500 000.

Denver Keswell, Senior Legal Advisor at Nedgroup Investments, says while much of the focus to date has been on the annual contribution limits, he would really like to see an increase in the lifetime limit.

Although there has been no indication of any limit increases – to either the annual or the lifetime limit, by not increasing the annual limit, there is an unintended consequence of a barrier to entry for any investors who intend to, or need to, withdraw and replace their funds in the short-medium term.

Keswell explains that once an investor withdraws funds from their TFI, they are unable to replace them. This means that if they do then ‘replace’ the funds they withdrew, all they will be doing is reducing their remaining allowance within the R500 000 lifetime limit.  Obviously, this can have a real impact on an investors financial outcome in the TFI, especially when compounded over time - so we would love to see this changed.

"At Nedgroup Investments, we are hoping that South Africa will follow a similar trajectory to the trends seen in the UK with their TFI equivalent – the individual savings account (ISA). About 5 years ago, the annual cap for ISAs was just below £12 000 and two years ago this had been increased to £20 000 pounds."

Keswell says as much as we would like to see an increase in the contribution limits to TFIs, we have not been given any indication that this will occur this year. However, when the annual limit was raised to R33 000 from R30 000 two years ago it did take us by surprise, so let’s hope that happens again. We will certainly be watching developments around the National Budget speech very closely.