Do you have any queries about Octagon Direct? If you don’t find the answers below, you’re welcome to contact us.
What you need to know about tax-free investments
What is a tax-free investment?
National Treasury has introduced tax-free investments to encourage people to save. The investment return earned on a tax-free investment isn't taxed and the money in a tax-free investment can be withdrawn at any time.
Why save in a tax-free investment?
- A tax-free investment is an effective way to save for your goals. Any interest, dividends or capital gains from your tax-free investment will be tax-free. This means that you don't pay tax on the growth on your investment.
- Your money can grow faster in a tax-free investment than in a regular savings account because you don't pay tax on the investment return.
- Saving in a tax-free investment gives you flexibility as you don't have to commit to any future contributions. You can withdraw from your investment at any time. However, withdrawing funds may prevent you from reaching your savings goals and will use up part of your lifetime limit for tax-free savings.
How much can I save in a tax-free investment?
National Treasury has put limits on the amount you can save in a tax-free investment. The total annual contribution in one tax year may not exceed the annual contribution limit, which is currently R33 000 per tax year. The total lifetime contribution may not exceed R500 000. Make sure you keep track of how much you've paid so that you don't exceed your limit across all approved tax-free investments (at Octagon Financial or other providers).
Can I have more than one tax-free investment?
Yes. There is no limit on the number of tax-free investments you can have. Make sure your annual payments across all approved tax-free investments (at Octagon Financial or other providers) do not exceed the annual contribution limit.
What happens if I invest more than R33 000 per year in tax-free investments?
Any contribution over R33 000 per tax year or R500 000 over a lifetime is taxed at 40%, so you would need to monitor your contributions closely.
Can I transfer a tax free investment from one provider to another?
No transfers between tax free investment providers is allowed as yet. National Treasury intends to expand the Regulation to allow individuals to transfer any amount in a tax free savings and investment account from one institution or product provider to another.
What if I’m an existing client with Octagon Financial?
The final Regulations provide that a client may not convert existing investments into a tax free investment. National Treasury is investigating the possibility and any changes will only be finalised later this year.
What is the impact of withdrawals?
Although allowed, withdrawing may not be a great idea. For example, if you invested R20 000 and then withdrew R20 000 in the same tax year, you would only be able to contribute an additional R13 000 in the same tax year before reaching the R33 000 annual contribution limit.
Can I open an account on behalf of a child?
Yes, you can open a tax-free account in the name of your children and sign the application on their behalf, if they are minors. By doing this you will be using part of their tax-free allowance, which limits their ability to save for themselves via this type of product later on. Also be careful of donations tax if you donate more than R100 000 per year. You need to declare the amount that you invested in your child’s account in your tax return.
Unit trusts in a nutshell
The Sanlam Group is a full member of the Association for Savings & Investment SA (ASISA). When you invest in a unit trust (also called a collective investment scheme), your money is pooled with the money of other investors. This pool of money is used to buy a portfolio of assets, such as shares (equities), bonds or listed property. As an investor, the value of the units you own is calculated by taking the number of units you own and multiplying them by the latest ruling price per unit. Forward pricing is used. Also, you’ll find details of what each fund invests in, as well as its risk profile, specified in the Minimum Disclosure Documents.
The price per unit (excluding money-market type funds) goes up and down according to the value of the underlying assets in the relevant portfolio. As is always the case, neither your capital nor the return of your investment is guaranteed for any unit trust fund investment. For information on unit trusts and how they work, along with our full range of funds and the relevant Minimum Disclosure Documents, please visit www.sanlamunittrusts.co.za or call us on 0860 100 266.
A few extra definitions and considerations
- A fund of funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges. This could result in a higher fee structure for the fund of funds.
- A feeder fund is a portfolio that, apart from assets in liquid form, consists solely of participatory interests in a single portfolio of a collective investment scheme, which also levies its own charges, which could result in a higher fee structure.
- Sanlam Collective Investments takes full legal responsibility for the co-branded portfolios (e.g. Graviton funds).
- Portfolios that invest in international investments, or investments in foreign securities, could be accompanied by additional risks, such as potential constraints on liquidity and repatriation of funds, macro-economic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information.
- Income payment(s) will only be paid out to a client’s bank account if the investment transactions (e.g. debit orders and deposits) used to purchase units have been cleared by the payment(s) will automatically be reinvested.
In the world of investments many different types of fees could potentially come into play. They can be split into three broad categories:
1) advice fees,
2) fees relating to the administration of your money, and
3) fees resulting from the investment/fund management of your money.
For all of these fees there could be an initial and an ongoing (annual) component.
Advice fees are almost always negotiable between you and your chosen financial adviser. You’ll see on the Minimum Disclosure Document of your chosen fund/s that the maximum annual advice fee could have been as high as 3.42% if you invested through an adviser.
But, because you are using Octagon Direct, you are investing directly with us and therefore you pay no initial or ongoing advice fees. That’s right: you pay zero advice fees when you choose this route.
When investing in a unit trust, your investment will have a designated administrator handling the receipt and payment of your money, all the necessary paperwork, the different types of reporting and tax certificates, and the answering of your questions – whether they are by phone, email or instant message.
When investing with Octagon Direct, we do all the admin for free. You therefore pay no ongoing admin fees, initial account set-up fees, debit order fees, account amendment fees, switching fees, rebalancing fees or penalties when you withdraw your money. It’s also possible to access our funds via the administration platforms of some of our competitors, but keep in mind that you will be paying them an admin fee when you take that route.
The only fee in this category that you could potentially pay with Octagon Direct is if a debit order or direct debit is returned by your bank due to insufficient funds being available in your bank account. In other words, you will be liable for any bank charges incurred as a result of a direct debit or monthly debit order being rejected by your bank.
Fund management fees
This is the only category of fees that you need to look at when you invest via Octagon Direct. This is where all the fees sit that relate to the investment management of your fund, for example the portfolio manager’s fees for his/her expertise; the trustees’ fees; auditor’s fees and the fund’s own bank charges.
The fee for the portfolio manager’s expertise is called the initial and annual manager fees on the Minimum Disclosure Document (MDD) of your chosen fund. But the more comprehensive total expense ratio (TER) plus the transaction cost (TC) are the more useful figures on the MDD as the sum of these two figures cover all the fees relating to the management of your chosen fund. These fees vary from fund to fund. The TER and TC are also likely to fluctuate from one quarter to the next, depending on the costs incurred over the most recent 12 months of reporting.
The good news is that the costs reflected in the TER and TC will be deducted directly from the fund, so that the performance figures quoted on the MDD are already net after all fees relating to the management of the fund have been deducted.
Factors and cut-off times for making transactions
Please make sure you send us your completed instruction (including supporting documents) before the transaction cut-off time. The SA business day transaction cut-off times for our funds are:
11:00 for Sanlam Alternative Income Funds
13:00 for money market funds
15:00 for all other funds.
A few more things to remember
- We can only process your instruction once we’ve received the correct and accurately completed form and the required supporting documents. If an instruction is issued incorrectly, is unclear, incomplete, or if the supporting documents are not received by the cut-off time, the processing of the transaction will be delayed. Any loss will be for the investors’ account.
- Your transaction will be priced using the ruling price of the fund for the day the transaction is processed, in other words, the day we receive all of the required information. Any loss will be for the investor’s account. Any interest earned on: money deposited for investment in a fund after the specified cut-off time, incorrect deposits or deposits for applications with outstanding requirements, will not be paid to the client as we are unable to transfer the money in the fund(s) account.
- If a debit order collection date falls on a non-business day, we will collect it on the first available business day thereafter.
Facts on ownership, information security and instructions
- The legal owner of the investment is the person in whose name the investment is registered, regardless of who the payer is. If the legal owner is a minor, we will only accept instructions from their legal guardian. We will only release information to, and act on instructions from, the investor, the authorised signatory or the appointed financial intermediary.
- We can only process your instructions once we have received the correct and accurately completed form and required supporting documents. If an instruction is issued incorrectly, is unclear, incomplete, or if the supporting documents are not received by the cut-off time, the transaction may be delayed. Any loss will be for the investors’ account.
- We permit ring-fencing for large withdrawals in terms of Notice 573 of the Collective Investment Schemes Control Act. Ring-fencing is the separation of assets and the delayed sale of units in a unit trust fund, in the event of a large sale of units within the fund, subject to certain conditions. This ensures that the sale of a large number of units will not force us to sell the underlying investments at a price in the market that could have a negative impact on other investors. We may delay paying the proceeds of the sale of units. If your sell instruction is affected by this ring-fencing, the payment and the value of your withdrawal could be impacted. In the event of this, we will contact you to discuss the process, where applicable.
Unclaimed assets and how they affect you
As a member of the Association for Savings and Investment SA (ASISA), we follow ASISA’s Unclaimed Assets standard.
- An unclaimed asset is any unit trust investment on which there have been no transactions for ten years, or in the case of a deceased estate, more than three years have passed since we have received the notice of death.
- Our policy is to continue reinvesting all income distributions (interest) and redemption payments until the unit trust is sold, regardless of the time frame. According to ASISA’s Unclaimed Assets standard, we follow a process of tracing investors or beneficiaries on any unclaimed assets. Any reasonable administrative and costs incurred to trace the investor may be recovered from the value of the portfolio, thereby reducing the value of your investment. Tracing will cease where the value of the unit trust investment is less than R1 000 and the costs of tracing exceeds the benefit of tracing.
More information on the ASISA Standard on Unclaimed Assets and the processes is available on www.asisa.org.za or from our client service centre on 0860 100 266. Please note that to prevent your investment becoming an unclaimed asset, it is your responsibility to inform us of any change in your personal information.
What to do if you change your surname, personal details or address
It’s your responsibility to keep us informed of any changes in your banking details, personal information or current identification information (e.g. change of address, change of surname and contact details). If any of your details have changed, click here to download the Investor Details Update form
What to do if you have a gripe
We want to give you outstanding client service, but sometimes things do go awry.
- If you’re dissatisfied with our service, or if any of our products have disappointed you, we want to hear about it. So please get in touch with us in whichever way suits you best:
- We want you to know that your views are very important to us. When we receive your complaint, a competent team, specifically trained to handle and resolve complaints, will investigate it and try to resolve it as soon as possible in a fair manner.
- If the complaint has not been resolved to your satisfaction, you may refer it to the Sanlam Arbitrator. The Sanlam Arbitrator is an impartial person that settles disputes between dissatisfied clients and Sanlam.
Sanlam Arbitrator contact details:
Fax: +27 21 957-1786
Want to know how we process your personal information?
We collect certain personal information about you in order to offer you the best possible service. Here’s how we keep that information safe...
- We will not share this information outside of the Sanlam Group, its associated groups or agents, without your explicit consent. In order to provide you with an effective service, we may be required to share this information with our administrators or agents who perform certain services for us (e.g. mail houses who post your statements on our behalf), members of the Sanlam Group, your financial adviser or broker, as well as with any regulatory bodies as the law requires. We may share your information with foreign regulatory bodies if required. Your information is used for administrative, operational, audit, marketing, research, legal and record keeping purposes.
- We will take all reasonable steps necessary to secure the integrity of any personal information which we hold about you and to safeguard it against unauthorised access. If you don’t consent to us using your personal information, there may be delays or some instructions might not be carried out.
- You can have access to your information at any time and ask us to correct any information we have in our possession. Please feel free to write to us to obtain a copy of this information. We keep relevant documents for a period of five years or more as required by the law. If you consent to us retaining your personal information for periods of longer than 5 years, we will restrict access to your information. It will only be processed for storage or for purposes of proof. Sanlam and all its group companies are required to collect relevant information from each client to ensure their identification and classification for tax purposes is correct according to the IGA, and report on these clients to the South African Revenue Services ("SARS") where necessary. The Intergovernmental Agreement ("the IGA") entered into between the Governments of South Africa and the United States of America was designed to improve international tax compliance and to implement the Foreign Account Tax Compliance Act ("FATCA"), and equivalent IGAs between the Government of South Africa and any other countries.