Advisories
Advisory 23
TAX FREE SAVINGS ACCOUNTS
This advisory is intended to clarify how CUDIC views the eligibility for deposit insurance as it relates to the new Tax Free Savings Account (TFSA).
In its February 2008 Budget, the federal government announced the introduction of a Tax Free Savings Account. This account will allow credit union customer-owners to set money aside in eligible investment vehicles and watch those savings grow tax free throughout their lifetime.
The TFSA is a registered plan into which a customer-owner can contribute a number of different qualified investments up to an established limit. Included in qualified investments are deposits such as chequing accounts, savings accounts and GIC’s. If a deposit account is otherwise eligible for CUDIC coverage, the deposit will continue to be eligible for deposit insurance coverage within the TFSA. However, if mutual funds, bonds, equities or various classes of customer-owner shares are contributed to the TFSA, they would not be covered by CUDIC insurance, as they would not be eligible for deposit insurance coverage outside of the TFSA.
The TFSA is a registered investment vehicle, so there will be the ability to have multiple contracts of $250,000 as is currently done for RRSP’s. Because contribution limits are much lower, it will take considerable time to reach the $250,000 coverage.
Should you have any questions concerning deposit insurance coverage for TFSA, please do not hesitate to contact your assigned Analyst. Our promotional material will be amended to include TFSA’s as eligible for deposit insurance.
December 2008
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