Transfers between providers finally kick in

Nonhlanhla Kunene
By Nonhlanhla Kunene February 27, 2018 15:55
Nonhlanhla Kunene | 27 March 2018

coming-soon-2461832_1280Tax-free savings account (TFSA) holders will be able to switch between providers from 1 March.

This has been part of the regulations from the outset in 2015 when TFSAs were launched, but National Treasury has delayed implementation to allow service providers time to set up systems to enable such transfers.

Denver Keswell, senior legal adviser at Nedgroup Investments, says that barring further word from regulators, from 1 March service providers will be obliged to carry out transfers or risk losing the right to provide or administer any further tax-free investments, other than the ones already under their administration before the deadline.

“It will be up to the service provider to see how they go about doing this, whether they have systems in place to do it or do it manually. But they have to provide the service if they want to continue offering tax-free investments,” he says.

On 31 March 2017 National Treasury issued regulations in terms of section 12T (8) of the Income Tax Act to outline the requirements for tax-free investments. The amendment of regulation 9 made provision for transfers between TFSA providers to take place from March this year.

Since inception in 2015 up to now, frustrated investors have had no choice but to either stick with their providers regardless of whether or not they were satisfied, or open an extra account with a different provider, which brought with it the added burden of keeping track of the limits to ensure they did not exceed the annual allowable limit.

In a worst-case scenario, switching between providers would have meant closing an account, opening a new one and investing the same funds into that. According to TFSA rules, that would count as a withdrawal and affect the annual and lifetime limits. This will soon be a thing of the past as providers are left with no option but to shape up or ship out.

Nonhlanhla Kunene
By Nonhlanhla Kunene February 27, 2018 15:55

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