The future of the tax free savings account is on the line in this federal election.

The focus of the debate has been mostly on the decision by the governing Conservatives to increase the annual contribution limit to $10,000 from $5,500. Their two main opponents, the Liberals and the New Democrats, have vowed to roll back the increase.

But TFSA account holders have other worries. Some fear future governments will renege on their promise to never tax money inside the accounts — unlikely, because it would be political suicide.

Lifetime contribution limits are another issue — other jurisdictions with similar accounts already have them. Additionally, under the current system, withdrawals don’t impact compensation levels for old age security or the guaranteed income supplement, and many wonder whether that will always be the case.

The Financial Post asked Canada’s five leading parties, based on current polls, to explain their positions on eight different issues when it comes to the TFSA and its future.

“If the trade off is between sustainability of the TFSA and a lifetime limit on contributions, I would choose a lifetime limit on contributions as opposed to (a lifetime limit) on accumulation,” said Finn Poschmann, president and chief executive of Atlantic Provinces Economic Council, and one of the co-authors of a report in 2001 calling for the creation of a tax-free account for savings.

An accumulation limit would be of interest to some Canadians who have been extremely successful in their TFSAs taking high-risk gambles. The Financial Post has reported on accounts with as much as $1.25 million in assets in them.

Since the accounts opened in 2009, lifetime contribution room has increased every year and stands at $41,000 as of 2015. Although the Tories ended indexation of the plan to inflation, another 25 years at $10,000 would add an extra $250,000 in lifetime room.

Poschmann was in favour of the $5,000 increase to the annual limit, while others have suggested it only benefits the wealthy. One critic includes Rhys Kesselman, who co-authored that original report calling for the creation of the account.

Kesselman has called the increase in the annual contribution limit “a ticking time bomb” that will starve the government of future revenue.

One thing that is clear is the TFSA is here to stay in some form. Poschmann said that, “legislatively,” any government could retroactively tax money in a TFSA but to “fundamentally renege on the program would of course be bad politically.” All of the parties that responded to the Post questionnaire were clear that they wouldn’t touch current TFSA holdings.

Meanwhile, with opposition to the $10,000 limit clear, the question becomes whether one should rush to their bank and make sure they have topped up their accounts for 2015 before the Tory increase is repealed — in the event they lose the election that is.

Jamie Golombek, managing director of tax and estate planning for the Canadian Imperial Bank of Commerce, said there is no need to panic about contributions for 2015.

“There’s no chance,” he said, about any party changing the rules in time for 2015. “It’s almost impossible for a new government to come in there and pass legislation changing it for the 2015 calendar year. Administratively it would be a nightmare. We don’t look at date of contributions, they are done based on a calendar year.”

Golombek doesn’t think anything will happen to unused past limits either. He thinks any rule changes will just affect contributions going forward for TFSAs.

“It’s still possible if there are changes, they won’t even do it until 2017,” said Golombek, who thinks it is conceivable some government could put a lifetime contribution limit on the TFSA. “A future government may decide the program is too expensive. They could stop future contributions, limit them or put a lifetime maximum contribution limit.”

Questions

Would your party ever consider getting rid of the TFSA? Would your party ever consider taxing the money in a TFSA, other than in cases where it was accumulated in violation of the current rules? Will your party continue to not count withdrawals, in terms of determining any claw backs on old age security based on income? Would your party keep the present annual limit of $10,000, increase it or reduce it? What would your party change the limit to? Does your party believe the TFSA should be indexed to inflation? Does your party support a lifetime contribution limit to the TFSA? Does your party believe there should be a lifetime limit on how much Canadians can accumulate in a TFSA? If you do feel Canadians in lower tax brackets are not utilizing TFSAs to the same degree as wealthier Canadians, is there a solution to getting them to contribute more? What is that solution?

Liberals

Liberals are committed to preserving TFSAs. No. Yes. Independent reports have demonstrated that almost doubling the contribution limit to 10,000 will, in the long term, disproportionately help the wealthiest Canadians who need it least. The Liberal Party will return contribution limits to a more reasonable $5,500. The Liberal Party will keep the TFSA indexed to inflation, as it was before. The Liberal Party does not intend to impose a lifetime contribution limit to TFSAs. The Liberal Party does not intend to impose a lifetime limit on how much Canadians can accumulate in their TFSAs. Stephen Harper’s plan to give more to those who need it least has failed Canadians. With wages flat in recent decades and rising costs, Canadian families are struggling under mounting household debt. In order to save more for their retirements and their children’s education, Canadians need better, stable jobs, and higher wages. Liberals understand that when we put more money in the pockets of our middle class, and those working hard to join it, the impact is widespread — our economy grows and all regions prosper.

New Democrats

We will not proceed with Stephen Harper’s plan to double TFSA limits, which will primarily benefit wealthy Canadians, but we have no intention of eliminating the program. No. Concerns have been raised about the fact that the current regime could allow very wealthy individuals to shelter substantial income while collecting old age security benefits and guaranteed income supplements that are meant to support low income seniors. We will review the rules while ensuring that low-income and middle-class seniors are not penalized for TFSA withdrawals. To ensure the long-run sustainability of the TFSA program and government finances, we would reverse the Conservatives’ doubling of the TFSA limit in order. We will be speaking more about details of our policy over the course of the campaign. We will be speaking more about details of our policy over the course of the campaign. We will be speaking more about details of our policy over the course of the campaign. The data is clear that most low income and low wealth Canadians have been unable to take advantage of the TFSA program. The best solution to this problem is to get the Canadian economy moving again to boost the incomes of Canadians. In addition, New Democratic commitments such as a $15 federal minimum wage and increasing the Working Income Tax Benefit will help boost the wages and savings of low income workers.

We will also work with the provinces to boost public pension benefits through the CPP and QPP to ensure Canadians can retire in dignity.

Conservatives

(Party issued a statement and would not respond to directly to questions. Answers are extrapolated from that statement and past party decisions.)

In 2009, under Prime Minister Harper’s leadership, we introduced the single most important personal savings vehicle since the RRSP: the Tax-Free Savings Account (TFSA). Both the Liberals and the NDP voted against the TFSA, as they voted against our tax cuts for families, seniors and workers. The TFSA is a flexible, registered savings vehicle that allows Canadians to earn tax-free investment income, including interest, dividends and capital gains. Contributions to a TFSA are not tax-deductible, but investment income earned in a TFSA and withdrawals from it are tax-free. The income earned in a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as the Canada Child Tax Benefit, the Goods and Services Tax/Harmonized Sales Tax Credit, the Age Credit, and Old Age Security and Guaranteed Income Supplement benefits. Earlier this year, our Conservative government nearly doubled the TFSA in order to allow Canadians to contribute even more each year. The Conservatives took away indexation for the TFSA. No answer. No answer. The TFSA is a popular means of saving for Canadians at all income levels. Individuals with annual incomes of less than $80,000 accounted for more than 80 per cent of all TFSA holders and about 75 per cent of TFSA assets as of the end of 2013. About half of TFSA holders had annual incomes of less than $42,000.

Green Party

No. We would not consider taxing it as it is a tax free vehicle meant to encourage savings. No answer. The TFSA limit should remain at $5,500. Yes. No answer. No answer. Bottom line is we believe that Tax Free Savings Accounts (TFSAs) are useful. However, the Harper Conservatives’ decision in Budget 2015 to increase the annual limit to $10,000 means that TFSAs become more of a vehicle for wealthier Canadians to shelter their income, than a means to help people to save for retirement or other exigencies.

Bloc Québécois

“Unfortunately we won’t be able to respond to your request, due to the important amount of demands we received,” a spokesperson said in an email.

Illustration by Andrew Barr/National Post

Financial Post

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