Pros and cons of unit trust investments versus endowment insurance policies
Last month we looked at the advantages of an endowment policy. This month we analyse the advantages and disadvantages of a unit trust investment. Note that a unit trust is not a policy and therefore does not fall under the Long Term Insurance Act. Advantages With a unit trust investment, you the taxpayer are the investor. This means that your individual tax rate would be used to calculate any tax, unlike the fund rate in an endowment policy. For those with lower tax rates (below 30%) it therefore makes sense to take out a unit trust as opposed to an endowment policy. As an example, an investment for a child would make more tax sense in a unit trust, as that would allow the child's lower tax rate to be used. You can make use of your R23,800 interest rebate (assuming you are under 65) and your annual R40,000 capital gains tax (CGT) exclusion if you are in a unit trust. This means unless you are in a money market-type unit trust, the interest earned in a unit trust should be lower than...
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