Finance Minister Godongwana urged to raise tax-free savings account limits ahead of 2026 budget
Financial services provider Old Mutual has called on Finance Minister Enoch Godongwana to increase the annual and lifetime limits for tax-free savings accounts
Image: Armand Hough / Independent Newspapers
Ahead of the 2026 national budget, financial services provider Old Mutual has called on Finance Minister Enoch Godongwana to increase the annual and lifetime limits for tax-free savings accounts.
The tax-free savings account was introduced in 2015 to encourage South Africans to save by allowing tax-free growth on contributions. While the annual contribution limit has increased over time, from R30,000 at inception to R36,000 in 2021, the lifetime limit remains at R500,000.
Lizl Budhram, Head of Advice at Old Mutual Personal Finance, said the company believes increasing the limits could give South Africans more room to save for retirement and improve long-term financial outcomes.
She suggested raising the annual contribution limit to R40,000 and the lifetime limit to R600,000.
“Tax-free investment accounts were introduced with the right intent, but more than ten years on, the contribution limits need to better reflect the foundational objective behind their introduction. When used alongside retirement funds and preservation vehicles, these accounts allow investors to build tax-efficient savings that can supplement retirement income and provide flexibility later in life,” Budhram said.
Budhram added that while TFSAs can be a useful complement to retirement savings, investors need to be aware of the rules governing contributions. Excess contributions are subject to a 40% penalty on the amount exceeding the limit, and withdrawals that are reinvested count as new contributions.
"An increase to R40,000 a year, which works out to just over R3,300 a month, would remain disciplined and accessible for many savers while significantly enhancing the long-term value of the tax-free benefit. Increasing the lifetime limit to R600,000 would also extend the investment horizon, allowing investors to benefit from tax-free growth for longer.
“Parents can invest on behalf of their children, which is a powerful way to build long-term wealth early, but it is important to remember that each child has their own annual and lifetime limits."
mthobisi.nozulela@iol.co.za
IOL Business