From this month, you can choose the piggy bank you like by taking advantage of a change in the rules that allow you to switch your tax-free savings from one institution to another. Picture: Getty Images
From this month, you can choose the piggy bank you like by taking advantage of a change in the rules that allow you to switch your tax-free savings from one institution to another. Picture: Getty Images

If your tax-free savings account is not meeting your expectations, you are now free to move your savings to another provider, but beware: there are some rules to navigate.

These relate to the choice of product, the investment minimums and some (fortunately limited) penalties.

It has been three years since tax-free investments were introduced, providing first-time investors with the ideal product to start saving in an easy and tax-efficient way, says Steven Schultz, the head of Momentum Investment Marketing.

From this month, you will enjoy the additional flexibility of being able to switch from one tax-free savings account provider to another, making these accounts more appealing, he says.

The benefit is that you will be able to assess your tax-free investments and, if they are not suitable for your needs, or not competitively priced, you can switch, says Denver Keswell, senior legal adviser at Nedgroup Investments.

A product provider may refuse to accept your savings transfer based on its product rules, but is not allowed to refuse your request to transfer your savings out, except under a few exceptional circumstances, Keswell says.

Money's snap survey of product providers' readiness to facilitate outgoing and incoming transfers of funds shows most are in a position to assist clients. Absa, Nedbank, Standard Bank, First National Bank, Capitec and Investec Bank all reported they were ready to allow transfers to other providers and accept savings transferred to them.

The benefit is that you will be able to assess your tax-free investments

However, some investment platform providers, such as Glacier by Sanlam, Allan Gray and Momentum Investment Services, can only assist with outgoing transfers and are not yet accepting incoming transfers - which is not a breach of the regulations.

"We intend to accept transfers later in the year if there is sufficient demand and when we are certain that we can service them well," says Allan Gray's head of product development, Earl van Zyl.

While providers are obliged to allow investors to transfer tax-free investments to other companies, they are not obliged to accept investments of a type they do not offer, and product rules will apply, says Rosemary Lightbody, senior policy adviser at the Association for Savings and Investment South Africa.

You may therefore have to reduce your investment to cash before it will be accepted by another provider. If you have to cash out early on a fixed-term product, you may lose some interest.

It you have unit trust fund investments with a manager or on a platform, it is possible to transfer these to another platform provider if it offers the same fund with the same fee class.

Not all providers allow partial transfers as they have rules about minimum investments - a limitation acceptable under the regulations provided you still have the choice to transfer and accept that your entire investment may have to be moved.

Daryll Welsh, head of product at Investec Investment Management Services, says its investors must transfer the full tax-free investment to another provider, and incoming transfers must be in cash due to the complexity of unit transfers.

Van Zyl says investors on Allan Gray's platform may transfer any proportion of their investment, except if the remaining value with Allan Gray is below R20000 (which is the minimum lump-sum investment). In this case the full sum must be transferred.

If you want to transfer your unit trusts on the Momentum Wealth platform, you are allowed only full transfers (either in units or cash, or a combination of the two), and if you are transferring units, you must ensure the receiving product provider administers exactly the same investment (with the same fee class), Schultz says.

Glacier's investment product manager, Roenica Tyson, says Glacier offers the option to transfer either units or cash to another provider.

The benefit of transferring units is that the investor remains in the market. However, given the large range of funds on the Glacier Tax-Free Investment Plan, it may be difficult to match these to other platform providers with smaller offerings, she says.

Ancley Jacobs, CEO of FNB Cash Investments, says you may be able to transfer units in a unit trust fund directly into its tax-free unit trust accounts provided product rules such as minimum investments are met.

 René Grobler, head of cash investments at Investec Bank, says it is important to ensure when you transfer tax-free savings to another provider that they go into the tax-free transfers account, so it is seen as a transfer, not a contribution to an existing account.

Charl Nel, Capitec's head of communications, says the bank accepts transfers of cash from tax-free savings accounts but unit transfers from a unit trust or similar investment cannot be accepted in a bank account.

The banks have minimum amounts you can transfer into and out of the tax-free products: it is R250 at Standard Bank, R50 at Nedbank, R500 at FNB and R1000 at Absa.

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