Half of Canadians yet to embrace TFSAs
In 2011, contribution limits will rise to $15,000
01/10/2011|Canadian Payroll Reporter|Last Updated: 01/10/2011
Slightly more than half of Canadians have yet to take advantage of Tax-Free Savings Accounts (TFSAs), according to a survey by ING Direct .
Eighty-seven per cent of Canadians who opened a TFSA since the program was launched in 2009 used it for an emergency fund or left it in a short-term investment such a savings account.
"The finding is not surprising, as the flexibility of the TFSA as a liquid investment vehicle sets it apart from an RRSP. There is no tax implication when you withdraw funds and you don't lose your contribution room over the long-term," said Peter Aceto, president and chief executive office of ING Direct Canada. "But that's also led to confusion, meaning many Canadians are not tapping the true strength of TFSAs to shield a wide range of investments from taxation as part of a longer-term retirement strategy."
The financial industry has to do a better job educating savers, said Aceto. In 2011, contribution limits will rise to $15,000 meaning TFSAs can play a larger role in investment portfolios. But the survey found 47 per cent of respondents were unsure of which investments they would use inside their TFSAs, and only 13 per cent considered products such as mutual funds that have the potential to generate higher returns.