Help us boost returns

It’s crucial to leverage the power of compounding.

- Pedri Reyneke

My husband and I are in our early 40s, and we both earn monthly salaries and interest from investments in a bank – an instant access account (our emergency fund with an interest rate of 8.9%) and a fixed deposit (maturing in February next year, which has R750,000 with an interest rate of 9.41%).

We were recently informed by SA Revenue Service that we are now provisional taxpayers due to this interest earned.

We currently do not have any debt and also have the following:

• A pension fund with our employers;

• Retirement annuity (RA) with a financial institution;

• Tax-free savings in a fixed deposit (limit R36,000 maxed);

• Monthly donations; and

• Medical aid deductions.

Kindly assist with the below queries to assist in optimising our investment returns through tax-efficient strategies:

• What are your thoughts about the diversification of our portfolio? Should we also consider investing in local dividends?

• Which type of investments have the least risk with guaranteed minimum returns but also are the most tax efficient?

• Is it beneficial to consider an endowment, considering we are in the 31% bracket? Will the return of the endowment outweigh the return/growth of the fixed deposit (with additional lump sum contributions to RA as deductions to offset the interest earned/tax)?

• Regarding endowments, when is the following statement applicable: "Some products are structured so that all the income from the underlying funds is shown and taxed as capital gain, meaning the entire investment could be taxed at 12% only". How can we structure endowments this way, and where can we find endowments structured in this manner?