Canadians confused about TFSAs

Six years after TFSAs were introduced, a Mackenzie Investments survey finds many Canadians still don’t understand how they work.

They’re still not familiar with the basic elements of the program, meaning they risk not using their accounts to the fullest.

Read: Higher TFSA limit prompts some Canadians to save more

The survey asked people five true or false questions about how TFSAs work, and 51% of people answered three or more correctly. That’s only slightly better than the results from the 2009 survey, when 44% answered three or more correctly.

The following questions were asked. The correct answers, and the percentage of those who answered correctly, are shown in brackets.

  1. Like an RRSP, contributions to a TFSA are tax-deductible. (False; 53% provided the correct answer compared with 43% in 2009)
  2. The TFSA contribution limit is $10,000 per year, if you don’t contribute the full $10,000 in a year, the remaining contribution room is lost. (False; 49% provided the correct answer compared with 36% in 2009)
  3. TFSA contribution room does not depend on earned income. Regardless of income level, all Canadians age 18 or older will receive $10,000 of contribution room each year. (True; 55% provided the correct answer compared with 63% in 2009)
  4. A broad range of investment options are available within a TFSA including stocks, bonds and mutual funds. (True; 46% provided the correct answer compared with 41% in 2009)
  5. An individual can own multiple TFSAs. (True; 39% provided the correct answer compared with 22% in 2009)

Read: Politics could shrink TFSA contribution room

Among those who don’t have a TFSA, 64% say it’s because they don’t have money to invest, followed by 26% who say they don’t know enough about TFSAs.

“There is so much discussion surrounding TFSA’s but when it comes to understanding them, Canadians are still bewildered,” says Carol Bezaire, vice-president, tax and estate and strategic philanthropy with Mackenzie. “For example, many people don’t realize you can hold TFSAs outside of banks and the accounts can hold a broad range of investment options such as stocks, mutual funds and bonds.”

Read: How the TFSA limit increase changes the savings landscape