Retiring soon? Here’s why a tax-free savings account can give you a boost

When it comes to saving for your retirement, a few good rules of thumb apply. For one thing, the earlier the better. But even more than that, every cent counts.

Whether it is to top up your retirement savings or make more tax-free, we believe that it is important to consider diversifying your retirement portfolio and invest in more than just a pension or provident fund. Tax-free savings accounts (TFSAs) were launched on 1 March 2015 by the South African National Treasury. TFSAs were introduced to encourage household savings by allowing South Africans to save up to R36 000 per tax year and R500 000 in their lifetime, with zero tax paid on the interest earned.

Millions of TFSAs have been opened since they were introduced. Imagine: if you were one of the millions who opened a tax-free savings account in 2015 and consistently saved the maximum annual amount, you would have saved R303 000 excluding interest, and would have paid no tax on the interest you earned. “To encourage a culture of saving from a young age, parents and legal guardians can open tax-free savings accounts for their loved ones, in their names. This could also help parents to pass on good saving habits to their children,” says Thami Cele, Head of Savings and Investment at Absa.

A TFSA is the perfect financial vehicle for long-term savings goals like your retirement. Absa has two tax-free solutions to meet your individual needs: one for when you need to have access to your funds during emergencies and one if you want to invest for a predefined term of 12 months without accessing your funds.

Absa’s banking products and services are focused on the needs of people and society. We are committed to meeting you in your reality and with your future in mind because your story matters. We aim to play a meaningful role by helping you write your stories.

How it works

An Absa Tax-free Savings Account enables you to save from as little as R1 000 while building up to your annual contribution of R36 000. With this account you can also earn additional interest with Absa’s Digital Bonus Rate when you open and transact digitally on any Absa digital channel, including the Absa Banking App. There is also a Tax-Free Deposit Account that requires a minimum lump sum of R30 000 and allows a maximum contribution of R36 000 per tax year.

All you need to open an account is your South African ID and proof of residence not older than three months.

Terms and conditions apply. Auth FSP/NCRCP7

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This post was sponsored by ABSA and produced by Studio24.