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Coronation tax-free savings account review 2022

Published by
Lethabo Ntsoane

The Coronation tax-free savings account provides a savings account that comes with tax benefits. The Coronation tax-free savings account gives account holders the opportunity to earn interest without having to pay any form of taxation. Taxes such as income tax, dividend tax, and capital gains tax won’t be levied on the savings account. 

The account is for anyone that wants to make savings, whether young or old. However, the account comes with certain limitations as set by SARS. Furthermore, failure to follow the SARS limitation will lead to the Coronation account being taxed by SARS. 

The Coronation tax-free savings account invests in funds that are administered by Coronation. Funds include a variety of mutual funds that target to outperform a specific benchmark. The amount of money invested will depend on the investment strategy chosen by the investor.

The Coronation tax-free savings account isn’t affected by Regulation 28 of the Pension Funds Act. This means that investors can invest without their savings being strictly apportioned according to regulation 28. One can invest in as many funds as possible, including those with offshore exposure. 

The Coronation tax-free savings account is one account that can be relied on when saving for retirement, a particular goal, or for any other reason. Before saving using the Coronation tax-free savings account, find out what the account is really all about by reading the discussion below. 

Coronation tax-free savings account summary

The Coronation tax-free investment account is a TFSA that allows account holders to save money in the account with the opportunity to invest the savings. The account will require one to invest the money saved in the account in one or more funds managed by Coronation. Coronation has 22 investment funds that the tax-free investment account holders can invest in. 

Investments into the Coronation investment can be made in two ways. One way is to make a money debit order into the Coronation tax-free savings account where the funds will be invested into the funds managed by Coronation. Alternatively, investors can deposit a lump sum into their Coronation tax-free savings account so that the funds can be invested. 

Monthly contributions into the Coronation tax-free savings account start from R250.00. The maximum contribution for the tax-free savings account is R3,000.00. The minimum lump-sum contribution to the account is R5,000.00. The maximum lump sum contribution to the account is R36,000.00. 

Since the tax-free savings account from Coronation comes with specific limits for both monthly and lifetime contributions, one has to understand the limits as set by SARS. The maximum annual contribution to the account should be R36,000.00 and the lifetime contributions to the account must not exceed R500,000.00. 

Failure to follow the limits as set by SARS comes with a tax penalty. A tax penalty of 40% of the additional amount invested will be imposed. This penalty is for any failure to stick within the yearly limit and the lifetime contribution limit. 

How the Coronation tax-free savings account work

The Coronation tax-free savings account can be used to save money tax-free. Savings in the account can be for an adult or for children. To invest through the Coronation tax-free savings account, one has to open the account in a prescribed manner. 

To open an account, one has to apply for the account either online or by filling out an application form. After filling out an application form, the applicant will receive a call from a Coronation consultant to discuss the opening of the account. The consultant can be asked various questions regarding the account. 

When opening the account, the frequency of deposits into the account will have to be stated. Deposits into the account can be made either monthly or by depositing a lump sum into the account. However, minimum deposit limits, as well as yearly and lifetime deposit limits, will have to be adhered to. 

The applicant will have to list the funds in which he/she wants to invest the contributions made into the account. The applicant has 22 Coronation-managed investment funds to choose from. One can switch from one fund to another during the course of the investment. 

Interest earned from the investment is automatically capitalised and this includes dividends earned. The account doesn’t have any initiation fees or administration fees since the account holder manages his/her investment. The proceeds from the investment are also tax-free. 

Withdrawals on the account can be made at any time. However, the deposits withdrawn will still contribute to the annual and lifetime contributions. Withdrawals won’t incur any taxes, which means income tax and other taxes won’t be levied. 

Advantages of the Coronation tax-free savings account

  • The account can be opened for children.
  • Savings in the account do not apply to Regulation 28 of the Pension Funds Act.
  • There are no taxes imposed on gains of a capital nature, income, or any other form of tax levied in South Africa.
  • Minimum monthly contributions into the account are moderate when compared to other tax-free savings accounts in South Africa.
  • Money invested can be used for any purpose.
  • Money invested can be accessed at any time.
  • One can move money from one fund to another to take advantage of the market inefficiencies.
  • There is no initiation or administration fee.

Disadvantages of the Coronation tax-free savings account

  • There are initiation fees set by SARS.
  • Failure to stick to the maximum contributions threshold results in hefty taxes.
  • Investment into Coronation funds is not guaranteed.
  • One has to manage his or her account therefore, investing by those that are unfamiliar with Coronation funds can be tough.

Conclusion

The Coronation tax-free savings account can be used to set up savings for retirement, education, health, emergency fund or any type of financial commitment. Money saved in the account can accumulate interest if invested strategically giving an account holder a return on investment in the medium to long term. 

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted at lethabo@rateweb.co.za

Published by
Lethabo Ntsoane
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