Financial institutions that provide tax-free savings accounts have to allow you to transfer your savings in full or in part to another provider should you wish to move – for example, if you find a more suitable savings or investment product, or one with lower costs.
You should not do this transfer by cashing in one investment, having the money paid to you and then reinvesting it in another provider’s account. This will count towards your annual (R36 000) and life time (R500 000) contribution limits towards a tax-free savings account.
You need to ask the financial services company to do the transfer for you.
A financial institution has to allow you to transfer your savings out of its tax-free savings account, but a provider can refuse to accept a transfer into its tax-free savings account based on its product rules. For example, a provider may refuse to accept partial transfers.
Any providers who could not facilitate a transfer out of their accounts had to stop accepting new investments from March 1, 2018 when regulations obliging companies to allow transfers were introduced.
When transfers may be refused
The only exceptions that allow a financial institution to refuse to let you transfer your savings out are:
The financial institution from which you are transferring your tax-free investment will have to provide a transfer certificate and send certain information – particularly about how much you have contributed - to the new financial institution with which you have chosen to invest.
The transfer must take place within 10 business days of your request, or of the maturity of your investment if you are transferring at the end of an investment term.
The transfer can be in cash or in the units of a collective investment scheme such as a unit trust fund or exchange traded fund, as long as the financial institution receiving your transfer has the same fund and fee class as the one from which you are transferring, and is willing to accept a transfer of units.
If you have money in a savings or investment account that is not a tax-free savings account, you cannot convert it into a tax-free account without being paid out, paying any capital gains tax that may be due and then re-investing in a tax-free account within the annual limits.
If you want to move a large amount from an ordinary investment into a tax-free savings account, you may need to do it over a few years to make the most of your annual capital gains tax exemption and to contribute to the tax-free savings account within the limits.
