Tax-free Savings and Investments.

Save tax-free with 22seven. Everything you need to know about tax-free investments and savings accounts in one place.

What is a tax-free savings account or investment?

To encourage saving, the government has introduced tax-exempt investment and savings products. This means you won’t be taxed a single cent on any of the returns on these investments. There is no Capital Gains Tax (CGT) or tax on the growth, interest and dividends earned. Which means more of your money stays yours.

How does it work?

You can put up to R33,000 per tax year (the equivalent of R2,750 a month), and R500,000 over your lifetime, into tax free investments. This amount is limited to each individual and not per investment.

Who is TFSA/TFI for?

Although all South Africans can open a Tax-free savings account or Tax-free investment, they're ideal for:

  • Young savers (who've just started working). The longer the capital is invested, the more tax free growth there will be. And with the flexibility of the investments younger investors are free to increase their monthly contributions whenever they like.

  • Parents (who've got young children). Tax-free investments or savings accounts can be opened in the name of a child, with their own R33,000 annual limit. A monthly contribution over a number of years (free of taxes on income earned) can be an excellent way to save for their education.

Where did TFSA/TFI come from?

Tax-free savings accounts are part of the government’s drive to encourage people to invest and save more for their future.

One of the key benefits of Tax-free savings accounts is that your money is accessible whenever you need it. For example, you can access your money in 18 years' time to pay for your child's tertiary education, or in 10 years to support your parents - unlike retirement accounts, which require you to reach a certain age before you can access your money.

In this way, Tax-free savings accounts are not a replacement for retirement accounts (which have their own benefits), but are envisioned to be more of a medium-to-long term savings vehicle providing people with an alternative to dipping into their retirement savings.

What about capital gains tax?

Capital Gains Tax is the tax charged on increases in the value of your investment. With the tax free savings, there is no Capital Gains Tax when you access your money or switch between funds.

The Highlights:

  • You may open more than one tax free savings account and investment, limited to R33,000 per tax year collectively across them all, with a lifetime limit of R500,000.

  • The returns or growth you earn on your investments are completely tax free.

  • You have flexible access to your investment and there are no exit penalties.

  • You can contribute a regular amount or a once off lump sum.

Important caveats:

  • Any amount you put into your investment(s) that takes you above the annual or lifetime limit will be penalised at 40% in that tax year.

  • Any amount that you withdraw from your account will count towards your annual and lifetime limit.

  • Tax-free benefits only apply to new savings or investment products.

What Tax-free products does 22seven offer?

The three Old Mutual funds available through 22seven are all recommended as long term investments of five or more years. They’re also all what’s called “passively managed” funds and have a fee of just 1.19%.

The flexibility of tax-free investments

Our tax-free investments offer low fees, simplicity and ease of access, making them a great savings choice. You have easy access to your money whenever you need it - withdrawals can be made at any time and with no penalties. However, no replacement of withdrawals are allowed. Contributions to your tax-free investment are also flexible so you can choose to put in a once off lump sum deposit or monthly amounts, which can be increased or decreased at any time.

Core Balanced Fund

Old Mutual Core
Balanced Fund

Medium risk.
Medium to high growth.
Some ups and downs.
More diverse; local and global.

Read the fund fact sheet.
Top 40 Index Fund

Old Mutual
FTSE RAFI® All World Index Feeder Fund

Higher risk.
higher growth.
More ups and downs.
All equities; all global.

Read the fund fact sheet.
Top 40 Index Fund

Old Mutual
Top 40 Index Fund

Higher risk.
Higher growth.
More ups and downs.
All equities; all local.

Read the fund fact sheet.

How 22seven helps you avoid penalties for excess contributions

When investing through 22seven, money that you put in will first go into your tax-free investment until it reaches the R33,000 limit each year. Thereafter, anything more that you put in will automatically go into a separate investment that is not tax-free.

Popular questions around Tax Free Savings Accounts and Investments.

Tax-free savings account / investment vs retirement plan

While the money you put into retirement annuities is before-tax money, the money you put into Tax-free savings accounts is after-tax money. In other words, you can put the money you earn from your job into retirement annuities before the government deducts tax, whereas you can only put the money you earn from your job into Tax-free savings accounts after the government deducts tax. Money in a tax-free savings account is accessible at any stage, while money invested in an RA cannot be accessed before the age of 55. An RA also falls outside the estate of an investor upon their death, whereas a tax-free savings account will be added to your estate and be subject to estate duty.

Tax-free savings account or tax free investment - what’s the difference?

Actually, there is no difference. The two terms can be used interchangeably. When the government introduced the concept, they were called tax-free savings accounts and so the industry has mostly adopted that term. However, we prefer to call them tax-free investments because people sometimes think of “savings accounts” as something to put money into or take out of any time, whereas “investments” are seen as longer-term than savings accounts. And the longer you leave your tax free investment, the more you benefit.

Can I open up a tax free investment for my child?

Yes you can open a Tax-free Investment on behalf of your child, but remember that you will be using part of their tax-free allowance, which may limit their ability to save for themselves in a tax-free investment later on in life.

Can I have more than one tax-free investment or savings account?

Yes you can. There is no limit on the number of tax free investments you can have but make sure your payments across all your tax-free savings accounts do not exceed the R33,000 yearly limit.

Do reinvestments and dividends count as a contribution?

Reinvestments of returns or dividends do not count as contributions as long as they are not withdrawn and reinvested.

How much am I allowed to contribute?

The maximum TFSA/TFI contribution limit is currently R33,000 in any given tax year (1 March to the end of February). The annual lifetime limit of R500,000 also applies.