Well, you read it here first on my Christmas Wish List 2007. Minister Flaherty has delivered on my request to institute a tax-free savings account just like the ISA that exists over here in the UK. Wonderful. These accounts are so simple and straightforward, they achieve much better than RRSPs the goal of getting people to save. There are no books written about ISAs, unlike the tome Preet Banerjee recently put out about RRSPs, because there's so little to write about. The worst thing about the new accounts is their awful acronym - TFSA. How the heck do you pronounce that - TaFSA? Didn't they learn with RRSP, where is the marketing savvy?
The $5,000 annual contribution limit is too low; better would have been double that and even better would have been four times higher, which would start killing off RRSPs. The "if you don't use it, you don't lose it" feature of the annual contribution limit is a great measure for added flexibility since many families with young children might not get the chance to save for a number of years.
I'd expect the new TFSA, as the info sheet suggests, to be heavily used by seniors, for instance for funding inheritances. The money can be put aside, grow tax-free and be non-taxable at death. While it is in the TFSA, it can serve as a safety cushion for unexpected health care costs and if not needed, passed along to the next generation. Increasing life expectancy could allow amassing a tidy sum.
In short, I believe the info sheet blurb is not too far off (except for the niggardly $5k) when it says "It’s the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP)."
It was nice to see our government paying attention to this humble blogger. I suppose they are waiting for the next budget to put in an annual tax-free capital gains exemption.