Are tax-free savings accounts working 10 years on?

It has been 10 years since the tax-free savings account (TFSA) was introduced in South Africa.

- Ernst van Biljon

It is aimed at South Africans in general as an investment vehicle suitable for most people's savings goals in a bid to improve the country's savings culture.

In a way, TFSAs replaced interest exemption on your personal income tax; interest exemption has not increased since tax-free savings were launched.

At the start, the maximum allowable contribution was R30,000 in a tax year.

A document issued by National Treasury on 14 March 2013, titled Non-retirement savings: Tax-free savings accounts, states the following in its introduction, referring to the budget speech of that year: "Tax-preferred savings accounts will have an initial annual contribution limit of R30,000, to be increased regularly in line with inflation, ...[with] a lifetime contribution limit of R500,000."

Investors were able to make contributions from 2015 (during the 2016 tax year of assessment), starting with a maximum of R30,000 for years one and two, increasing to R33,000 for the following three years, and then R36,000 from 1 March 2020.