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The Globe and Mail

Harper talks TFSAs: A 'supplement' to RRSPs, not a replacement

Stephen Harper, who's promising to double the room in tax-free savings accounts if re-elected, was asked Thursday for his thoughts on the future of the TFSA.

There's lots of debate between financial planners about whether the TFSAs are better for retirement savings than registered retirement savings plans, or RRSPs.

Because there's tremendous investor interest in the future of this savings vehicle, the Conservative Leader was asked how he thought use of the account might evolve.

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The tax-free savings account, introduced in the 2008 budget, provides Canadians a means of earning tax-free investment income. Canadians can currently contribute an additional $5,000 to the account each year.

The Conservatives are pledging to double this to $10,000 per year once the budget is balanced, which could be three to four years in the future.

Since 2009, about 4.7 million Canadians have opened TFSAs, which have a combined market value of $18-billion right now. By comparison, registered education savings plans, introduced in 1972, have about $26-billion in them.

Globe: "Where do you see TFSAs going? They've been a remarkable hit [with investors]and they are starting to rival RESPs in terms of their popularity. Do you see them becoming the top investment vehicle going forward, even replacing RRSPs? And second, would you consider giving seniors some kind of extra ... retroactive room [in TFSAs]because of course they aren't not getting as many years to put money into this?"

Stephen Harper: First of all: I don't think the tax-free savings account, the TFSA, will replace the RRSP. I think it supplements it. They are different vehicles. They are used by different people for different reasons.

The RRSP is very much for retirement, very much long-term planning and you are tax-sheltering now and you've got a very specific purpose for that money later.

Whereas with the TFSA, there is much more flexibility about taking money in and out and of course you don't pay tax when you take it out, so it's available for a lot wider purposes of saving, particularly [for]younger people, who may not, their savings plans may not be immediately focused on retirement.

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So I don't think it's a question that one will replace the other.

Although they can interact. As you know many seniors who have maxed-out RRSPs and are withdrawing from RRIFs can use the TFSA to shelter some future revenue.

It's a very flexible vehicle. If you don't use room in a certain year, you can carry it forward.

And obviously the [promised]increases I've announced today - that we will bring in during the next Parliament -will give seniors and others obviously greater room and flexible room into the future.

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About the Author
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

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