INVESTMENTS

INTERNATIONAL/OFFSHORE INVESTMENTS

What is the International Offshore Investment Plan?

An International/Offshore Investment Plan is an international/offshore endowment issued by your selected Product Provider, which offers portfolios that give our clients the ability to invest in international markets, through a lump sum investment in US Dollars. This is a good option for investors to use up their annual offshore allowance, while enjoying tax efficiencies.

Investors can invest using their Single Discretionary Allowance (SDA) of up to R1 million and Financial Investment Allowance (FIA) of up to R10 million from the South African Reserve Bank (SARB). Investors will be able to self-certify offshore clearance up to R1 million per year.

What are the benefits of investing in the International/Offshore Investment Plan?

Tax efficiency

You can get access to these portfolios by utilising your annual offshore allowance. The International/Offshore Investment Plan uses an endowment wrapper, so investment returns are taxed in the Product Provider’s hands at the current preferential tax rate applicable to the Individual Policyholder Fund for long-term insurers i.e. 30% income tax and an effective capital gains tax rate of 12%. This works to the advantage of policyholders in higher tax brackets. As the International/Offshore Investment Plan is an endowment and the returns are taxed in the Product Provider’s hands, the endowment proceeds will generally be treated as capital in nature and generally be exempt from South African capital gains tax in the hands of the investor, provided the investor was the original beneficial owner of that investment.
 

UNIT TRUSTS

A unit trust gives easy, cost-effective access to assets such as shares, listed property and bonds, which are not usually available to direct investors with relatively smaller amounts to invest. The fund manager is responsible for diversifying your investment to protect it from being too exposed to a potential fall of a single asset.

If you are a South African resident, any dividend income earned by the unit trust is subject to a withholding tax. This withholding tax rate is presently 20% (on local dividends). Again, this does not apply if you buy your unit trust through your Tax-free Savings Account.

Unit trust companies set minimum investment amounts for each fund, both for lump sums and for recurring investments. Minimum investment amounts can be higher or lower, but a R5 000 lump sum and R500 a monthly contribution.
 

ENDOWMENTS

Endowments are a great way to start investing or to grow your wealth through regularly investing smaller amounts. The Endowment can be used to save additional funds. There is no additional tax to be paid as all proceeds received from this investment is already nett of tax. If withdrawals are made after five years, regular withdrawals could be subject to Capital Gains Tax.

Endowments contributions vary from Service Providers however minimum investment amounts for recurring investments begin from R500 per monthly contribution and lumpsum R100 000.
 

TAX FREE SAVINGS

Returns are completely tax-free. The longer you invest, the more compound growth you earn. Note that all Tax Free Savings have contribution limits of R36 000 per year and R500 000 over a lifetime
Your money can grow faster in a tax-free savings account compared to a regular savings account because you don't pay tax on the investment return.

A tax-free savings account is therefore an effective way to save for your goals, because any interest, dividends or capital gains from your tax-free savings account will be free of tax
Saving in a tax-free savings account gives you flexibility as you don’t have to commit to any future contributions. You can withdraw from your investment at any time. Withdrawing funds, however, may prevent you from reaching your savings goals, and will use up part of your lifetime limit for tax-free savings.
Contributions to a tax-free savings account are made from your post-tax income.
 

THE DIFFERENCE BETWEEN TAX-FREE SAVINGS AND ENDOWMENT PLANS

A tax-free savings account works largely the same as an endowment, except that you don’t pay any tax on your interest or dividends earned, and capital gains are tax-free too. This means you don’t pay tax on the growth of your investment, which makes it far more effective way to reach your goals.
 

GUARANTEED INVESTMENT PLANS

A Guaranteed Investment Plan provides a guaranteed fixed return on your investment.

Why should you consider investing in a Guaranteed Investment Plan?

Placing your money in an investment plan can be daunting when you consider the uncertainty of the markets and the economy. Now you can invest with confidence knowing that your investment plan will offer you a guaranteed return.

A Guaranteed Investment Plan is the ideal investment if you:

• Are looking for a safe haven in which to invest your money.
• Require a guaranteed amount at the end of five years that is not subject to market volatility.