The Tax-Free Savings Account is one of your best investment vehicles

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Always keep in mind that the money received monthly from a retirement pension or a life annuity is income, and therefore taxable.

Bruce Whitfield discusses retirement planning and tax-free saving with Magda Wierzycka, Executive Chairman of Sygnia.

– South Africans do not save enough; that’s a fact

– A Tax-Free Savings Account is one of the best vehicles to start saving and investing for your retirement


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South Africa is not known for its culture of saving and we are regularly reminded that we don’t save enough.

The majority of us are at risk of ending up without enough funds to retire comfortably.

As Bruce Whitfield points out, many South Africans who put funds into vehicles such as retirement annuities and life annuities do not realize that the money they will receive each month is treated as income and is therefore imposed.

“It might be charged at a lower rate than where they were working… but any income is actually taxable.”

RELATED: EXPLANATION Tax-Free Savings Accounts vs Retirement Annuities 101

An extremely useful and beneficial vehicle for starting a savings habit is a tax-free savings account.

It is one of the finest investment opportunities created in South Africa, comments Whitfield.

He talks retirement with Magda Wierzycka, founder and executive chairwoman of asset manager Sygnia.

She says the government’s thinking behind tax-free saving is exactly that people generally don’t save enough.

The concept was therefore born to encourage South Africans to save. It was the main objective. And what it actually allows you to do is use the tax-free account as a wrapper for what I always define as a shopping bag that you put your investments in.

Magda Wierzycka, Executive President – Sygnia

Basically this saves you completely tax free…R36,000 a year up to a maximum of R500,000 over your lifetime…and for many people this is actually a lot of money.

Magda Wierzycka, Executive President – Sygnia

It’s wonderful… and, by the way, this kind of tax-exempt accounts exist all over the world.

Magda Wierzycka, Executive President – Sygnia

Wierzycka says there’s also a general misconception that your post-retirement living expenses will be much lower.

First, you have to deal with inflation; then it is also possible that your medical costs will increase.

In many cases, your medical bills start to escalate and you can’t ignore them in the calculations, which many people do.

Magda Wierzycka, Executive President – Sygnia

One of the fundamentals of saving and investing is to start saving as early in life as possible, Wierzycka points out.

What helped her develop this habit at the age of 25 was thinking of her monthly salary of R5,000 as R4,000, so the 20% she set aside in savings were obvious.

Wierzycka says she never looked at her benefit statements to avoid the temptation to withdraw some of her money.

I was pleasantly surprised when, after all these years of saving, my retirement fund now stands at R16 million.

Magda Wierzycka, Executive President – Sygnia

Scroll up for more information on Tax-Free Savings Accounts and savings tips from Wierzycka in the interview audio


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