I’m assisting a family member with finances. I’ve seen questions similar to hers often pop up over the years, but times are changing so rapidly that I think the answer probably has too!
The past few years have been particularly challenging for South Africa’s economy but there are many investment options your family member can choose from such as unit trusts, endowments, and guaranteed annuities.A unit trust is an investment product that pools the funds and then invests the funds in various asset classes such as cash, bonds, properties, and equities. There are various options that cater for different needs.
Some of the drawbacks of a unit trust investment are that there are tax implications in terms of capital gains tax, you cannot nominate a beneficiary, and your capital is not guaranteed. A South African can take up to R11 million offshore per calendar year subject to tax clearance from the South African Revenue Services . The clearance will generally be granted to any person whose tax affairs are in good standing with Sars. The first R1 million may be taken offshore without prior clearance from Sars. Linked endowments provide a fixed after-tax maturity value at the end of five years.
The downside of this type of annuity is that your money dies with you and no money will be passed on to your spouse or descendants. You will forfeit your savings if you die sooner than expected.
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