Would you save more if you didn't pay tax?

While the proposed introduction of tax-free savings accounts is arguably one of the most exciting regulatory developments for middle-class retail investors in years, there are wide-ranging views about whether it will incentivise South Africans to save more.

In a policy document released earlier this year, National Treasury notes that sustainable growth and development as envisaged by the National Development Plan "will require higher savings, investment and export growth”.

Drawing on data from the South African Reserve Bank it says net household savings as a proportion of disposable income have slowly dropped and have on average been negative since the year 2000.

"Not only is the aggregate level of savings across the economy low, but surveys suggest that the number of adults who do any saving at all is around 42%, with only half of those saving through formal channels [FinScope survey 2013],” it notes.

The planned introduction of tax-free savings accounts is one of government’s initiatives to encourage South Africans to save more to lessen the vulnerability of households.

Author: Ingé Lamprecht (Moneyweb)