The percentage of Canadians who report having a tax-free savings account more than doubled during 2013, new research shows.
BMO Bank of Montreal published this finding in a summary of results from its third annual Tax Free Savings Account (TFSA) report. The survey, conducted by Pollara, finds that 48 percent of Canadians report having a TFSA, up from 23 percent in 2012.
Despite the high adoption rate, the study reveals that many Canadians remain unfamiliar with specific aspects of the TFSA program. Among the report’s findings:
- TFSA holders plan to contribute an average of $3,625 this year;
- Canadian men and women are equally likely to have a TFSA, while those aged 65-plus are more likely to have an account than Canadians in other age groups (53 percent);
- TFSA adoption is strongest in Western Canada (Alberta at 55 percent, the Prairies and B.C. at 53 percent each) and weakest in Atlantic Canada (34 percent);
- Canadians identify not having to pay taxes on withdrawals (33 percent) and the ability to withdraw funds at any time (27 percent) as being the key benefits of the TFSA;
- TFSAs are being used most often as a vehicle to save for retirement (47 percent) and as an emergency source of funds (43 percent);
- Cash is the most common instrument being held in TFSAs (57 percent), followed by mutual funds (25 percent), guaranteed investment certificates (GICs) (23 percent), stocks (14 percent) and exchange-traded funds (ETFs) (5 percent);
- The report finds that, while 68 percent of Canadians claim to be knowledgeable about TFSAs — up from 60 percent in 2012 — many are still not familiar with specific aspects of the account;
- Just 19 percent know that the new contribution limit is $5,500 (up from $5,000);
- Only 11 percent correctly identify all six types of investments that are eligible to be held within a TFSA;
- Around half of Canadians say they know when TFSA contributions are taxed (52 percent) and how much one is allowed to re-contribute after making a withdrawal (47 percent).
The following is an analysis of TFSAs by region: