Tax Free Savings Accounts: Just the Facts

Here are the most important facts about the Tax Free Savings Account.

Introduction of the Tax Free Savings Account: January 1, 2009, right at the height of the economic meltdown

What’s new: Stephen Harper promises to double the contribution limits to the Tax Free Savings Account, from $5,000 a year to $10,000.


After-tax income of Canadian individuals in 2008: $31,400

Median after-tax income of Canadian individuals in 2008: $25,400

Drop in number of full-time jobs in the recession, from peak to trough:
465,000 ( in seasonally adjusted terms)

Proportion of Canadian households that saved in 2009: 57% (43% did not) (Source: Statistics Canada, custom data ordered by CCPA, to be released soon)

Cost of TFSA to public treasury, as estimated by Budget 2008: $920 million over first five years of implementation, $3 billion a year upon full operationalization

Number of accounts by end of 2010: 4.8 million

Eligible population (18+): estimated to be approx 26 million

Proportion of Canadians who took advantage: 18% (would be a lower share of all Canadian households, since some families will have several members with accounts)

Canadians’ Number One Concern: Healthcare

Canadians’ Second Concern: Jobs


  1. Thanks for this handy summary, Armine.

    I’d love to see some reporting on the take up of TFSAs by income level. Where do these 18% of Canadians stand in the income spectrum? My guess is that the beneficiaries are largely those who least need government supports, while the costs are going to be making a sizeable hole in the federal treasury.

    TFSAs make more sense than RRSPs for earners in the lower tax brackets who have any money left over to save, but I wonder how many actually know that. That would be students starting out their careers, new immigrants coming into entry level jobs and non-profit workers who are accepting a lower earning career on a permanent basis.

    I doubt that the TFSA are a very effective vehicle to encourage actual savings though. Of those 18% of individuals who used them, how many would have been saving without TFSAs?

    If TFSAs are there to induce Canadians to save rather than to simply reward those who are already saving, then their effectiveness needs to be evaluated. If ineffective, they should be phased out.

  2. My thoughts are that the TFSAs are designed to benefit mainly those with high incomes, but look attractive to those with low incomes.
    Depositing $5,000 per year for 50 years would mean $250,000 + interest in a tax-free savings account. If, as Harper proposes, deposits are raised to $10,000 per year then the total would be $500,000 + interest. This would benefit only those with that kind of money.
    As pointws out above the government loses income tax, and it loses it mainly from the wealthy.

    The taxation system should be designed to counteract the inherent inequity of the capitalist system, not increase the inequity. The TFSAs are a bad idea.

    RESPs are in the same category. You only benefit if you have lots of money. They should be phased out too.

  3. Thank you for citing the average and median income figures for Canadians. It appears that anybody hugging close to those from below or above these figures and are a single income earner with children will not benefit from the income splitting scam either.

  4. I find the government’s method of verifying your contribution room has some room for improvement (for those people who shift money near the year end to take advantage of better rates in the new year)

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