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Also read the following articles by Claude Hannah:

- How much you should save for retirement

- Why medical aid is woefully inadequate (and how affordable gap cover helps)

- Can’t (or won’t) buy to let? Don’t sweat; there’s a far more lucrative option

- It costs peanuts to insure your most valuable asset

(Click here for more personal finance articles such as this one.)

In an effort to further incentivise personal savings in South Africa, government is introducing new tax free savings accounts from 1 March 2015. All proceeds of investments through these accounts will be tax-free in the hands of the individual, which includes dividends, capital gains or interest.

The key features of the proposed reform are as follows:

• Individuals will be allowed to open two tax exempt savings accounts per year.

• Each account may have interest or equity products, or both.

• Total contributions to each account is limited to R30 000 per tax year.

• Taxpayers will be responsible for ensuring that their contributions do not exceed the annual limit.

• Any amounts withdrawn from the account cannot be replaced.

• The total lifetime contribution limit will be R500 000. The accumulated savings (contributions plus interest) can exceed R500 000.

It is important to note that these incentives are for the purpose of non-retirement savings. This means that individuals are essentially encouraged to make full use of the tax-deductible contributions on retirement savings as well as a “rainy day” tax free savings account to avoid having to take on more debt for unforeseen circumstances.

Also read the following articles by Claude Hannah:

- How much you should save for retirement

- Why medical aid is woefully inadequate (and how affordable gap cover helps)

- Can’t (or won’t) buy to let? Don’t sweat; there’s a far more lucrative option

- It costs peanuts to insure your most valuable asset

(Click here for more personal finance articles such as this one.)

Claude Hannah is a financial planner for Venn-Sure Consulting. He completed his degree in Financial Risk Management from the University of Stellenbosch in 2006 and is currently in the process of completing the post graduate CFP qualification. Claude helps to organise and simplify the often complicated and busy financial lives of his clients. He takes great pride in providing the highest level of service to help his clients build and protect their wealth.