From the beginning of March, you have been able to transfer savings in a tax-free investment from one provider of such investments to another.
You can transfer all or some of your savings, and it can be out of an account that has a guaranteed interest rate and a fixed term.
Transfers were originally scheduled to be permitted from March 1 last year, but the implementation date was postponed for a year to allow product providers to adapt their systems.
Piwe Tshombe, the personal income tax economist at National Treasury, says industry has had time to develop its systems to accommodate transfers, and product providers should be able to transfer benefits to another provider.
He says the amendments to the regulations governing tax-free savings accounts (TFSAs) specify that transfers will be required by all product providers that offer tax-free savings accounts from March 1.
“Any product provider unwilling or unable to allow transfers of [benefits] of an investor in any TFSA will no longer be allowed to open new TFSAs to investors. They will only be permitted to continue managing those that they already managed as at March 1, 2018. Importantly, they will not be allowed to accept further contributions into those products already being managed on March 1. Note, however, that while product providers are all compelled to allow transfers out to other product providers, they are not compelled to allow transfers in from other providers.”
This means that, although you are entitled to transfer your savings out of your present TFSA, if you are unhappy with the returns, for example, you will have to choose a provider that will accommodate you on its TFSA platform.
A report on the Intellidex savetaxfree.co.za website says: “Since inception in 2015 up to now, frustrated investors have had no choice but to either stick with their providers regardless of whether or not they were satisfied, or open an extra account with a different provider, which brought with it the added burden of keeping track of the limits to ensure they did not exceed the annual allowable limit. In a worst-case scenario, switching between providers would have meant closing an account, which would have counted as a withdrawal and affected the investor’s annual and lifetime limits.”
According to the amended regulations governing TFSAs, which were gazetted in March last year:
• Product providers must transfer your savings within 10 business days, or, if you are transferring funds on the maturity of an account, within 10 business of the maturity date.
• You may not transfer within 10 business days of the end of the tax year.
• A product provider may refuse to transfer money if there is a remaining amount that is below the product provider’s minimum required amount.
• The product provider from which the savings are being transferred must produce a certificate containing details of the account, both for you, the investor, and the product provider to which the account is transferred.
• If the account has a fixed term and guaranteed rate of return, the product provider from which the savings are being transferred must calculate the return due to you using a formula stipulated in the regulations.
• The product provider is not obliged to transfer amounts from a TFSA more than twice a year.