An Effective Approach to TFSA's 

The recent budget speech saw an increased allowance for Tax-free savings accounts (TFSA’s) to R46 000 per annum, per person.

This means that a couple can now invest R92 000 per annum, and so becomes more viable than before, especially where the interest exemption of R23 800 per annum remains (and this is R34 500 for persons over 65 years of age).

The increase in the allowance for taxpayers who pay tax on interest, though, now warrants them taking a closer look again. 

My own view on TFSA’s was that I was never convinced where it was introduced as the all-encompassing, powerful tool for lower-earners to engage in, especially if they are below the interest exemption, or if they are below the income tax threshold for paying income tax. However, for the high-income earner or investor where they pay tax on interest in their annual tax return, then it “should be on the to-do list”.   

At the same time, the intended nature of a TFSA is to be longer-term. Therefore, the investment should probably be invested more in equity-based solutions, and where the structure of a TFSA lends some CGT relief in time.    

Old Mutual Wealth on TFSA’s 

Old Mutual Wealth now share their thoughts as attached, where “any client with strong resistance to avoid withdrawals in the short-term, looking to save for a longer-term goal, can benefit from the compounding interest and tax benefits offered by the TFI. 

Because of the annual and lifetime limits, the Tax Free Investment is not likely to form a significant portion of most high-income or high net asset value clients’ portfolios”. 

Ninety One on TFSA’s 

Ninety One last week issued this note on TFSA’s;

Simple mistakes TFSA investors continue to make

With ten years of data now available, it is possible to analyse whether investors and advisors are taking full advantage of TFSAs. Despite the tax-free advantages of TFSAs for long-term savings, investors are making simple mistakes that can impact the material benefits they offer.

Tax-free savings accounts (TFSAs) were introduced in 2015 to encourage South Africans to save more. Ten years later, we now have a sufficiently long track record to analyse whether investors and advisors are maximising the material benefits that they offer; the growth and income received on a TFSA are tax-free, which means that you are not liable for any capital gains tax (CGT) or income tax on the dividends and interest received on your investment.

Maximise your annual TFSA contribution, early in the tax year

Consider that someone who has maximised their annual contribution limit from the outset would have invested R375 000 by the end of February 2026. Interestingly, the largest TFSA account value on the Ninety One Investment Platform (Ninety One IP) was approximately R1.13 million by the end of December 2025, i.e. tax-free growth of R791 000 – more than 2.3 times the total amount invested! And in aggregate, TFSA investors at Ninety One IP now have a total of approximately R6.75 billion invested, being a combination of the smallish annual contributions and tax-free market growth.

Maximising any tax benefit is an important consideration, as is appreciating that the earlier you start earning investment returns, the earlier those investment returns start compounding. Analysis ¹ undertaken by Ninety One shows that simply investing in the Ninety One Opportunity Fund via a TFSA at the beginning of each tax year, as opposed to the end of the tax year,

would result in as much as an additional 16% payout after 15 years. And, for those who cannot commit to an investment of R46 000 at the beginning of each tax year, it is still more financially rewarding to initiate a monthly debit order of R3 833.33, compared to investing R46 000 at the end of each tax year.

Unfortunately, an analysis of Ninety One IP TFSA cash flow shows that not only are many investors waiting until the end of the tax year to top up their TFSA but that many debit order investors have not increased their monthly debit order amount from the previous maximum contribution limits of initially R2 500 per month and then R2 750 per month to the prior limit of R3 000 per month. Be sure not to miss out now that the monthly limit has increased to R3 833.33.

Disappointingly, less than half of active TFSA investors on the Ninety One IP platform invested their TFSA in the last tax year. Fewer still invested close to the maximum allowance.

These are all opportunities missed.

Invest for growth, over the long term

A key insight when setting up a TFSA is that the underlying investment portfolio should be consistent with the long-term nature of the investment; based on the current annual limit, it will take almost 14 years to reach the lifetime contribution limit of R500 000. 

This is a key consideration as the tax benefits of TFSAs compound exponentially over time. Therefore, it makes no sense for an investor to use a TFSA for an investment horizon of less than five years.

While most Ninety One IP TFSA investors appear to agree - more than 90% are invested in offshore, equity or multi-asset (balanced or flexible) funds - unfortunately, up to 10% of investors are not maximising the return potential of growth assets/investments.

Don’t treat your TFSA as an emergency fund

TFSA benefits only accrue to those investors who remain invested for the full investment period. Remember that a TFSA allowance is a ‘use it or lose it’ allowance – if you withdraw some or all of your TFSA investment, you cannot reinvest the amount withdrawn.

A significant development over the past year has been the decline in the number of investors who accessed their TFSA. Over the previous two years, almost 12% of Ninety One IP TFSA investors made some level of withdrawal. This has now fallen to below 3%, with less than half a per cent making a full withdrawal.

The message that TFSAs should not be accessed unless necessary appears to be resonating.

Conclusion

In ten short years, early adopters are already reaping the material benefits offered by TFSAs. However, investors must stay the course and, whenever possible, invest the maximum allowable amount at the beginning of each tax year into a growth-oriented fund. If this is not possible, it is preferable to initiate a monthly debit order rather than wait until the end of the tax year to contribute. 

The earlier you start earning investment returns, the earlier those investment returns start compounding, tax-free! 

Should I open One in my Children’s names, too?

I have been asked this question before, and my own view overall is not to - especially where you want to save for them to spend the funds on, say a deposit on a home, or for university studies and such needs. 

This is because you will limit your child’s lifetime allowance (currently R500 000). Any amount withdrawn is still deducted from the lifetime contribution limit and cannot be "replaced" later.

I would rather open a separate unit trust in their own names in most instances than use the TFSA structure.  This allows the investor to withdraw funds without thinking twice about the rules that govern TFSAs. 

But I do concur that maybe the TFSA’s rules then could be a good thing at other times for protection of the funds against unnecessary spending in making one think twice………….. 

Where opening a TFSA for your children’s benefit does make sense is if you have already fully maximised your own TFSA, and you can afford to contribute to a child's TFSA, and never touch it until much later in life (i.e., until they are around age 50), it can then be a powerful wealth-building tool. 

Adding to TFSA Early in the Tax Year

After 10 years’ experience, it is evident that investors benefit even more when adding to their TFSA early in the new tax year. 

The 28^th of February, being the end of the tax year, falling on a Saturday this year, I can share that I had several requests from clients in the build-up phase of their wealth building, emailing us between Sunday 1 March and Monday the 2^nd  of March, asking to add this year’s contribution. 

I applaud their commitment to their financial planning.  

War in Iran | Market Recoveries on Geopolitical Crises are Historically Quick 

We are all rather disappointed with what we see evolving around the war in Iran, where the factual content of what we see on the war itself is pretty much the same as what you see on television and social media. 

However, overall, our client portfolios today are largely intact, and our discretionary-managed PWM solutions and SIS Strategies are still rather neatly ahead of where we started the year, after a great 2025.  

What we do know is that geopolitical crises often trigger short-term volatility as markets react emotionally to uncertainty, but history shows that these episodes have frequently created attractive entry points for long-term investors.

For investors, this typically means that sharp selloffs driven by headlines - rather than deterioration in underlying corporate fundamentals - can temporarily depress valuations and improve forward return potential. 

This was also softly alluded to in our notes, sharing our formal views last week, saying that we would keep an eye on this from this point of view.    

However, because this pattern is now widely recognised, history has shown that markets tend to price in the expected recovery more quickly, which can reduce both the depth and duration of mispricing. 

The implication is that while opportunities still arise during periods of geopolitical stress, they may be shorter-lived and require disciplined positioning rather than reactive decision-making. 

Maintaining diversification and a long-term investment horizon remains critical to capturing these opportunities without taking undue risk.