South Africans have two powerful ways to build wealth outside their retirement savings: Tax-Free Savings Accounts (TFSAs) and discretionary investment accounts. At Prospr, our discretionary investment accounts are called Onshore Discretionary accounts. Both can play an important role in a financial plan, but they serve different purposes.
A TFSA is one of the most tax-efficient investment vehicles available. You can contribute up to R46,000 per year, subject to a R500,000 lifetime limit, and all growth — including interest, dividends and capital gains — is completely tax-free. Withdrawals are also tax-free, but any contribution room used is generally lost once funds are withdrawn. For that reason, TFSAs are often best suited to long-term investing where the power of tax-free compounding can be fully realised.
An Onshore Discretionary account, by contrast, offers complete flexibility. There are no contribution limits, no restrictions on withdrawals, and no rules governing how your money must be invested. You can add or withdraw funds whenever you choose and invest across a broad range of shares, ETFs and funds. The trade-off is that investment income and realised capital gains may be subject to tax.
Onshore Discretionary accounts are particularly useful for investors who have already maximised their retirement-annuity and TFSA contributions, who are saving for shorter- or medium-term goals, or who simply want access to capital without the restrictions associated with retirement savings vehicles.
A useful way to think about the different accounts is:
- Your SIPP RA builds retirement wealth, powered by tax deductions and long-term compounding.
- Your TFSA builds long-term wealth, powered by tax-free growth.
- Your Onshore Discretionary account builds flexible wealth, powered by unlimited contributions and unrestricted access to your capital.
For many investors, the most efficient sequence is to first take advantage of retirement-annuity tax deductions, then maximise TFSA contributions, and finally direct additional savings into an Onshore Discretionary account. While everyone's circumstances are different, this approach allows you to make the most of the tax benefits available while still building accessible wealth outside retirement structures.
At Prospr, you can hold all three under one dashboard and see how they work together as part of a broader financial plan. It's not about choosing one over the other — it's about using each account for the purpose it was designed to serve.