"South Africa needs to take urgent action to reverse the dismal savings rate and Fundisa is one of the initiatives being launched by the industry to encourage a savings habit. Collective investments because of the low costs and highly regulated environment are an ideal vehicle for savings."
The fund - which opened on Monday - will have minimum contributions of R40 for debit orders and once off investments. Investors must have a Mzansi or similar account and be South African citizens. They will be able to access Fundisa through most collective investment companies as well as Absa, Nedbank, Standard Bank and the Post Office.
Investors in the fund will receive a 25 percent bonus from the Department of Education and industry members which will be added to their capital and paid directly to a registered institution for a child's school and college fees.
The maximum bonus will be R600.
To qualify for the bonus the investment has to be used to pay for post school education at either a college or university.
When the learner is ready to begin studying an award certificate will be issued giving details of the investment and bonus. The learner in turn will hand the certificate to the college or university.
Investors can withdraw their capital any time but will forfeit the bonus. The Fundisa Fund will levy an annual fee of 1.25 percent and the financial advisor's fee (if a consultant is used) is a maximum of one percent.
The collective investments industry will work closely with the National Student Financial Aid Scheme (NSFAS). Fundisa will compliment existing funding mechanisms provided by NSFAS in the form of student loans for qualifying low income families.
Fundisa is in line with the Financial Sector Charter recommendations on low cost savings vehicles for the LSM 1- 5 categories and is a three year pilot project.
The Fundisa investment portfolio will invest in low risk instruments such as money market securities, bank deposits and government bonds. In the longer term the fund may consider offering an equity option giving investors the opportunity to earn the higher returns of equities for beneficiaries who are very young and therefore have a long investment horizon.