More than half of Canadians still don't have a Tax-Free Savings Account
Almost a third are not planning to open a TFSA in 2012 or 2013
TORONTO – November 1, 2012 – The Tax-Free Savings Account (TFSA) is still not being used by the majority of Canadians, and general knowledge about the savings product continues to lack. A new survey by ING DIRECT reveals 44% of Canadians have a vague idea of how the TFSA works, while 19% say they don't understand it at all.
But a lack of knowledge isn't the main reason why more than half of Canadians (52%) have not opened a TFSA. Not having money to contribute is the reason cited by 53% of those who don't have a TFSA, a revelation that supports recent findings, from a different survey, that 53% of Canadians live paycheque-to-paycheque.*
Close to a third (31%) of those surveyed who don't have a TFSA said they have no intention of opening one this year or next, while 52% remain undecided.
"The TFSA has been around for nearly four years, and it's unfortunate that so many Canadians aren't taking full advantage of this savings opportunity," says Peter Aceto, president and CEO, ING DIRECT. "Since its launch, TFSAs have been a great way to reach short-term and long-term savings goals and provide flexibility that other investment options, like RSPs, don't."
Of those Canadians who have a TFSA, 35% have made withdrawals from the account. Half (50%) said they needed emergency funds, 21% did so because they achieved their savings goal and 16% admitted to treating their TFSA as a regular savings account.
Saving for retirement is the primary reason 38% of those surveyed have opened a TFSA, followed by emergency funding (30%). Nearly a quarter (24%) of younger Canadians, ages 18-34, choose to use their TFSA as an emergency fund, while 19% are using it to save for a down payment on a house.
Canadians' outlook on TFSAs:
- Three-quarters of Canadians (74%) view TFSAs as a long-term savings tool.
- Retirement Savings Plans (RSPs) top the list as preferred investments, with 52% of those surveyed ranking RSPs ahead of TFSAs, which came in second (29%).
- Close to half (47%) of Canadians hold their TFSA savings in a savings account; 17% in mutual funds and 10% in a GIC.
- A quarter (25%) of respondents have used less than half of the contribution room available for 2012 (between $1 - $9,000).
Aceto added: "With a TFSA, there's no tax implication when you withdraw funds, and you don't lose your contribution room over the long term. But many people are still unaware of these rules since a third (34%) of respondents weren't sure whether you pay tax when withdrawing funds from a TFSA, and half (52%) are unsure if you can have more than one TFSA - the answer is yes. Being knowledgeable about the relevance and benefits of this savings program – and saving in general – is a key part to Canadians' financial success."
According to the survey, 61% of Canadians feel they are responsible for tracking their own TFSA contributions and withdrawals, while 23% believe that responsibility lies with their bank.
To learn more about TFSAs, visit ING DIRECT Top 10 Things to Know about the Tax-Free Savings Account.
Until December 31, 2012, ING DIRECT is encouraging Canadians to start saving for their 2013 contribution. Early birds can open a 2013 TFSA Kick Start Account and earn interest on the money they save there. On January 1, 2013, ING DIRECT will deposit your 2013 contribution (up to $5,000 from the Kick Start Account) and even double the interest earned in your Kick Start Account. Any remaining funds over the maximum contribution will be deposited into an Investment Savings Account. For more information on the offer, visit http://www.ingdirect.ca/en/save-invest/tfkickstart/index.html.
About ING DIRECT
ING DIRECT is Canada's leading direct bank with over 1.8 million Clients and close to $40 billion in total assets. ING DIRECT is the bright way forward in everyday banking for Canadians, offering value added, simple products such as high interest savings accounts, including TFSAs, GICs and RSPs with no fees or service charges, low rates on mortgages and a no-fee, daily chequing account that actually pays interest. Low cost, index based mutual funds are sold through ING DIRECT Funds Limited. ING DIRECT has been operating in Canada since 1997 and paid more than $5 billion in interest to Clients. ING DIRECT is open for banking 24 hours a day, 7 days a week, at ingdirect.ca, on mobile devices at m.ingdirect.ca or by calling 1-800 ING DIRECT (1-800-464-3473).
About the Survey
From September 26 to September 27, 2012, an online survey was conducted among 1,003 randomly selected Canadian adults who are Angus Reid Forum panellists. The margin of error—which measures sampling variability—is +/- 3.1%, 19 times out of 20. The results have been statistically weighted according to the most current education, age, gender and region Census data to ensure a sample representative of the entire adult population of Canada. Discrepancies in or between totals are due to rounding.
* From August 21 to August 22, 2012, an online survey was conducted among 1,000 randomly selected Canadian adults who are Angus Reid Forum panelists. The margin of error—which measures sampling variability—is +/- 3.1%, 19 times out of 20. The results have been statistically weighted according to the most current education, age, gender and region Census data to ensure a sample representative of the entire adult population of Canada. Discrepancies in or between totals are due to rounding.