New research shows TFSAs are attracting first time savers

Nonhlanhla Kunene
By Nonhlanhla Kunene September 30, 2015 08:01

By Nonhlanhla Kunene and Colin Anthony

The results of savetaxfree.co.za’s maiden survey into the tax-free savings sector show promising signs that it is attracting first-time savers – which was a primary goal of National Treasury in introducing tax-free savings accounts (TFSAs). Nearly a third of the 35 384 TFSAs opened between 1 March and 30 June (excluding cash deposits) are believed to be first-time savers.

Download the full report here.

Apart from assessing the state of the tax-free savings account (TFSA) market in quantitative terms, qualitative issues were also explored, with the aim of providing insights both to policy makers and account providers. The survey focused on getting an indication of the take up of tax-free savings during the first four months of the product’s introduction to the South African market.

The results were drawn from responses to a questionnaire sent to TFSA providers. An estimated 90% responded. Most banks, however, refused to divulge details of their cash TFSAs and the survey was thus limited to stockbrokers, asset managers and life insurance companies. The findings paint quite an accurate picture of the general performance of the industry in its infancy, a performance which savetaxfree.co.za, in conjunction with its parent company, research house Intellidex, plans to keep tracking as the product matures. The most significant findings indicate that between 1 March and 30 June:

  • 35 384 accounts were opened
  • Of those, 24% were with stockbrokers 26% with asset managers, typically investing in unit trusts, and 53% with life insurance companies
  • 20% used the full R30 000 allowable limit immediately on opening the account
  • The total asset value of all accounts as at 30 June was R284.31m
  • The average balance in each TFSA was R8 035
  • Equities made up 65.5% of the total investments in the accounts, followed by cash
  • 11 374 of the new TFSAs are believed to belong to first-time savers
  • 15 763 clients (45%) held existing accounts with their TFSA provider

“It is not a bad start for the first few months of the accounts,” says Intellidex chairman Stuart Theobald. “It is interesting that the big life insurance companies have gained the most market share, which shows their distribution strength. But stockbrokers have also done well, particularly in attracting first-time investors. That reveals an early trend, but things could change quickly as the market evolves.”

Theobald explains more about the research results in this video:

Savetaxfree.co.za will conduct further surveys to gauge how South Africans are making use of TFSAs and to track trends in order to provide useful insights.

 

Nonhlanhla Kunene
By Nonhlanhla Kunene September 30, 2015 08:01
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