Since Canadian Prime Minister Stephen Harper implemented the Tax-Free Savings Account (TFSA), many have flocked to the account. As it enters its fifth year, a poll conducted suggests that many have the account, but are not utilizing it.
In 2008, Finance Minister Jim Flaherty introduced the TFSA initiative in the federal budget. It was passed and came into effect on Jan. 1, 2009. The idea was and still is supported by many in the business community, including the C.D. Howe Institute, the Canadian Taxpayers Federation, the Canadian Bankers Association and many more.
Contributions made by Canadians to the TFSA are not deductible for income tax functions and investment income, such as dividends and capital gains, earned is not taxed even when money is withdrawn.
The annual TFSA dollar limit for 2012 is $5,000. One can save $5,000, any unused TFSA money from the year prior and also the amount withdrawn the year before.
Although many Canadians have a TFSA, a new poll shows that they aren’t really using them.
According to a CIBC poll conducted by Harris/Decima, 47 percent of respondents said they have already established a TFSA, but close to half of those TFSA holders have made a contribution this year. Residents in British Columbia were the most likely to have a TFSA (52 percent), while those in Atlantic Canada were the least likely (42 percent).
Furthermore, when asked what they were using the TFSA account for, 41 percent said they had no plans at all for the funds. Meanwhile, 36 percent said they will use the TFSA towards their retirement, 30 percent stated it’s being used as an emergency fund and 17 percent responded that the funds will be spent for major purchases.
When studying the age brackets, youth between the ages of 18 to 24 said they plan to use the TFSA for a major purchase, while those between 45 and 54 are saving it for retirement.
“It is encouraging to see that almost half of Canadians have taken advantage of the Tax Free Savings Account, which gives them an additional option to help them reach their financial goals," said Colette Delaney, Executive Vice President of Retail & Business Banking at CIBC, in a press release. "Given how versatile the TFSA is, there is an opportunity for more Canadians to either contribute to their existing TFSA, or to consider how opening a TFSA could help them achieve their savings goals sooner."
The Harris/Decima telephone survey was conducted with a little more than 2,000 adult Canadians between Jul. 5 and Jul. 15. It contains a margin of error of +/- 2.2 percentage points.