Tax-Free Savings Account TFSA

Important notice: The trust declaration that specifies the conditions governing your National Bank TFSA has been revised. Click here for more information.

accueil_celi

The Tax Free Savings Account (TFSA) is an investment vehicle that enables you to build up your savings in a tax-free environment, regardless of your annual income level.

Main advantages

Tax-free savings

coche_bleue

The investment income you earn in your TFSA is not taxable, even when you make withdrawals.

  • The income earned in the TFSA and the withdrawals made from the TFSA do not affect your eligibility for government benefits and credits (e.g. Guaranteed Income Supplement, Old Age Security Pension).
coche_bleue

You have access to a variety of investment options: Guaranteed Investment Certificates (GICs), mutual funds and other investments eligible for self-directed accounts (brokerage accounts)1.

Flexible savings

coche_bleue

The TFSA helps you meet your savings needs throughout your life (not only after retirement).

  • You can withdraw2 funds from your TFSA at any time for any purpose.
  • If you do not make the maximum annual contribution, your unused contribution room is carried forward to subsequent years.

    Example: If you contribute $2,000 to your TFSA in 2009 and $3,000 in 2010, your contribution room for 2011 will be $10,000 ($3,000 carried forward from 2009 + $2,000 carried forward from 2010 + $5,0003 in 2011).
1 Limited to investments that are eligible under the Income Tax Act (Canada)
2 Subject to the terms and conditions applicable to the selected investments
3 Subject to be indexed according to the Consumer Price Index (CPI) rounded to the nearest $500.
0[1].gif

All individuals1 aged 18 and over who are Canadian residents qualify for a TFSA, and regardless of your current situation the TFSA provides many advantages.

You are a student who has a couple of projects in mind

If you work part time you can start building TFSA savings. There are only two conditions: you must be a Canadian resident, and you must be at least 18 years of age.

The TFSA could be the right choice for you
Are you saving up to move out on your own, attend school abroad, or travel to an exotic location? Whatever you have in mind, the TFSA will help you grow your savings tax-free. Plus, you can withdraw as much as you like, whenever you like and for any reason2.

2 Subject to the terms and conditions applicable to the selected investments

You would like to save for retirement

The TFSA doesn't replace an RRSP but it can help you optimize your retirement strategies. When it comes to choosing between an RRSP and a TFSA, various factors have to be taken into account.

For example, if you currently have a low tax rate (e.g., you are a student), it may be better to start by contributing to a TFSA. Then, when you enter a higher tax bracket, you can withdraw the amount invested in your TFSA and transfer it to an RRSP. You may even qualify for a tax refund.

Can't decide between an RRSP and a TFSA?
One thing to consider is what your income-tax rate might be when you are ready to withdraw those funds. But if you are able to contribute to both an RRSP and a TFSA, so much the better!

Here is an example:

Reddish

If your RRSP deduction rate (tax refund expressed as a percentage) is the same as the tax rate in effect after you retire, contributing to a TFSA is comparable to saving in an RRSP.

  • Tax refund: 45%
  • Tax rate after retirement: 45%
Greenish

If your tax rate will be higher after retirement than before (which is the case for retirees affected by the Old Age Security Pension clawback), a TFSA is more advantageous than an RRSP.

  • Tax refund: 45%
  • Tax rate after retirement: 55%
Bluish

If your tax rate will be lower after retirement than before (which is the case for most retirees), contributing to an RRSP is more advantageous than a TFSA.

  • Tax refund: 45%
  • Tax rate after retirement: 35%
  RRSP TSFA
Scenario 1 Scenario 2 Scenario 3
2009 contribution

$9,091

$9,091

$9,091

$5,000

Tax refund
( 45%)

$(4091)

$(4091)

$(4091)

$-

Net cost

$5,000

$5,000

$5,000

$5,000

Total amount accumulated after
20 years (6%)

$29,156

$29,156

$29,156

$16,036

Tax rate after retirement

35 %

45 %

55 %

0 %

Income taxes

$(10,205)

$(13,120)

$(16,036)

$-

Net funds available

$18 951

$16 036

$13 120

$16 036

These examples and assumptions illustrate the possible advantages of these two products under specific conditions.

The information provided here should not be considered advice or notification. Clients should always have their adviser or tax specialist confirm the benefits of the solutions described. This information does not create any legal or contractual obligation for National Bank or its subsidiaries.

You would like to save up for a rainy day

Investing in your TFSA is an excellent way to build an emergency fund. Since withdrawals3 are not taxable, the TFSA is a flexible tool for covering unforeseen expenses.

3Amounts withdrawn from your TFSA can be redeposited starting the following year.

You would like to save in order to buy a home

If you are thinking about buying your first home, combine the advantages of both investment solutions and contribute to both an RRSP and a TFSA!

Start by setting aside funds in your TFSA, and then use money from your TFSA to contribute to your RRSP. 90 Days after you've made your first RRSP contributions4 you'll be eligible for the Home Buyers' Plan (HBP)5. You and your spouse can each withdraw up to $25,000 from your RRSPs without having to pay any income tax on those withdrawals.

You would like to buy a home but it wouldn't be your first
If you do not qualify for the Home Buyers' Plan (i.e., you're not buying your first home), the TFSA is still an excellent way to save up for your home purchase. You can set aside funds in a tax free environment and then withdraw them once you find the home of your dreams!

4 Your RRSP contributions must remain in your RRSP for at least 90 days before they can be withdrawn under the Home Buyers' Plan.
5 To be eligible for the HBP, the home must be located in Canada, purchased or built before October 1 of the calendar year following the RRSP withdrawal and serve as the buyer's principal residence within a year of being purchased or built. You and your spouse can each withdraw up to $25,000 from your RRSPs. You have 15 years, as of the second calendar year after the withdrawal, to put those amounts back into your RRSPs. Your annual repayment must be equal to 1/15 of the total amounts withdrawn.

You are eligible for government benefits and you'd like to minimize the impact of your investment income on your benefits

The income earned in your TFSA and the withdrawals made from your TFSA do not affect your eligibility for income-tested government benefits or credits such as the Guaranteed Income Supplement (GIS), Old Age Security pension (OAS) or employment insurance.

In other words, regardless of how much your TFSA generates or how much you withdraw, you will receive the same benefits that you would if you had not contributed to a TFSA.

You have already made the maximum contribution to your RRSP

By putting your additional savings into a TFSA, you can ensure that your investment income will not be taxed.

You are already retired

If you have surplus savings after you retire, any amounts that you don't need at the current time can be invested in a TFSA. The income generated by your surplus savings will be tax free.

In addition, the income earned in your TFSA and the withdrawals made from your TFSA will not affect your eligibility for income-tested government benefits and credits such as the Guaranteed Income Supplement (GIS) or Old Age Security pension (OAS).

You are over 71 years of age and your spouse is not younger than you
There is no age limit for a TFSA, which means that, unlike an RRSP, you can always continue to build up your savings.

View 3 possible retirement scenarios

  • Lucy is planning to retire at age 65.
  • She has $110,000 in RRSP savings.
  • She receives $500 a month in CPP benefits, plus OAS and GIS.
  • Her cost of living is $19,750 (annually).
  • Her investments show a 6% return.
ampoule

For Lucy's RRSP strategy to be as effective as investing in a TFSA, she would have to reduce her cost of living from $19,750 to $18,150.

Analysis of 3 scenarios

Keep her RRSP*
If Lucy keeps her RRSP with the above conditions, the funds in her RRSP will be used up by the time she is 79.

graphique_reer_1

Cash in her RRSP over 3 years and deposit her savings in a non-registered account*
If Lucy cashes in her RRSP over a 3-year period and places the funds in a non-registered account, her funds will last until she is 88.

graphique_non-enregistre_1

Cash in her RRSP over 3 years and use the TFSA*
If Lucy cashes in her RRSP over a 3-year period and deposits her savings in a non-registered account and a TFSA as her contribution room allows, her funds will last until she is 100.

graphique_celi_1

* The data presented in these graphs is hypothetical. The calculations are provided for information purposes only to illustrate the advantages that could be gained from using a TFSA in identical conditions.

1 Other than trusts

 TFSA - RRSP  Comparison

Purpose TFSA RRSP
Main purpose

Meets your savings needs throughout your life (not only after retirement)

Mainly meets retirement needs

Tax treatment

Both savings vehicles offer tax advantages
but there are some minor differences between them

Eligibility TFSA RRSP
Minimum age

18

None

Maximum age None

71

Maturity date (termination)

None

December 31 of the year in which you turn 71 years of age1

Top

Contribution Room TFSA RRSP
Annual contribution limit
 

$5,000 (2011)
$5,000 (2012)
$5,500 (2013)

$22,450 (2011)
$22,970 (2012)
$23,820 (2013)

Contribution limit as
a % of earned income

No matter how much you earn, the contribution limit is $5,000

18% of earned income
(Subject to the annual contribution limit)

Excess contributions

Penalty of 1% per month

Penalty of 1% per month (Up to $2,000 in excess contributions are allowed without penalty)

Unused contribution room carried forward


From year to year


From year to year

Contribution room restored after withdrawals


Starting the following year

Contribution limit indexed?

According to the Consumer Price index (CPI), rounded to
the nearest $500

Based on the increase in the Average Industrial Wage (AIW)

Spousal contributions?

No, but one spouse can give the other spouse the funds needed for his/her contribution
without being subject to
income attribution rules

Transfer to spouse in the event of relationship breakdown / death?


Without affecting
contribution room


Without affecting
contribution room

Top

Tax rules TFSA RRSP
Tax deductible contributions?


TFSA contributions cannot be deducted from income.

Taxable income

Withdrawals taxable ?


You can withdraw2 funds from your TFSA at any time for any purpose without having to pay tax on the withdrawals.


You can withdraw2 funds from your RRSP at any time for any purpose but you have to pay tax on the withdrawals.

Minimum withdrawal


After you convert your
RRSP into a RRIF

Impact on income-tested government retirement benefits and tax credits
(clawback of Old Age Security and Guaranteed Income Supplement)


Does not reduce benefits or tax credits.


May reduce benefits and tax credits

Tax impact in the event of death


If transferred to the spouse. The value of the TFSA is never taxable.

- If the TFSA is left to a person other than your spouse, the TFSA will be terminated and the investments will become non-registered assets.
- The income generated by those non-registered assets will be taxable.


If rolled over to the spouse

Top

1 You have to withdraw the amount accumulated in your RRSP and invest it in a Registered Retirement Income Fund (RRIF) before December 31 st of the year in which you turn 71.
2 Subject to the terms and conditions of the selected investments.
3 Attribution rules are income tax provisions that apply to an individual who transfers assets to a third party. Under these rules, income earned on the transferred assets has to be included in the individual's own income

TFSA - RRSP  Comparison

The income earned in your TFSA is tax-free, which is not the case for a non-registered account. The table below shows the advantages of a TFSA versus a non-registered account.

Example:

    Non-registered account   TFSA  

Monthly contribution 

 

$100

 

$100

 

Time period (years) 

 

20

 

20

 

Rate of return1

 

5.50%

 

5.50%

 

Income tax rate

 

26.00%

 

0,00%

 

Account balance after 20 years

$36,679

$43,078

 

Total contributions over 20 years

$24,000

$24,000

 

After-tax investment income

$12,679

$19,078

 
  You would pay $6,399 less
in taxes with a TFSA
($19,078 - $12,679 = $6,399)
graphique_celi-vs-sansceli

Calculations are for information purposes only: they illustrate the impact of lower taxes payable on TFSA revenue during an investment period under identical conditions. Actual returns on investments may be higher or lower than in this example and will vary according to investment type and time period. The data shown here is for information purposes only and does not create any legal or contractual obligation for National Bank or its subsidiaries.

Top

1 Effective annual rate of return compounded annually thereafter

Main features

Is there a minimum and maximum age for contributing to a TFSA?

If you are a Canadian resident, you can start contributing to a TFSA at the age of 18. There's no maximum age for contributing to a TFSA.

Can I have more than one TFSA?

You can open more than one TFSA but the annual contribution limit (or more if you have unused contribution room from previous years) will apply to all your TFSAs combined.

Contributions

What is the annual limit for contributing to a TFSA?

The maximum contribution for 2013 is $5,500. In subsequent years, the contribution limit will be indexed according to the inflation rate (rounded to the nearest $500).

Are TFSA contributions tax-deductible?

No. Contributions to a TFSA are not tax-deductible but the income generated in a TFSA and the withdrawals made from a TFSA are not subject to income tax.

Does my income affect my TFSA contribution limit?

No. Any Canadian resident aged 18 or over can contribute yearly to a TFSA regardless of their income level.

What happens if my contributions exceed the maximum allowed?

Contributions that exceed your contribution room are subject to a penalty of 1% per month.

How will I be informed if I reach my contribution limit?

The Canada Revenue Agency (CRA) will track your contribution room. CRA reports this amount to individuals through the “My Account” function on the CRA web site: www.cra.gc.ca/myaccount.

Will the annual contribution limit remain the same in future years?

Every year, the limit will be indexed according to the Consumer Price Index (rounded to the nearest $500).

Can my unused contribution room be carried forward to subsequent years?

Yes. Unused contribution room will be automatically carried forward to subsequent years.
For example, if you contribute $2,000 to a TFSA in 2009 and $3,000 in 2010, your contribution room for 2011 will be $10,000 because you would carry forward $3,000 from 2009 and $2,000 from 2010 and add your contribution room for 2011 ($3,000 + $2,000 + $5,000)

Is there a cumulative limit for unused contribution room?

No. Unused contribution room will be carried forward automatically to subsequent years.

Can I borrow to make my TFSA contribution?

Yes. However, the interest you pay on the funds borrowed is not deductible for income tax purposes.

Income

Is the investment income earned within my TFSA taxable?

No. TFSA investment income is not taxable and does not affect income-tested government benefits or tax credits.

Will my TFSA investment income affect my eligibility for income-tested government benefits and tax credits?

No. The income you earn in your TFSA, and the withdrawals you make from your TFSA, will not affect your eligibility for government benefits or tax credits.

Withdrawals

When can I make withdrawals from my TFSA?

You can withdraw funds from your TFSA whenever you want, as long as you adhere to the terms and conditions of the investments you selected.

Is there a maximum withdrawal limit?

No. There is no limit on the amounts you can withdraw or the number of withdrawals.

Are withdrawals from a TFSA taxable?

No. The amounts withdrawn from a TFSA are not subject to income tax.

Can I redeposit the amounts I withdraw from my TFSA?

Yes. However, withdrawn amounts cannot be redeposited until the following year (or later).

Can I withdraw amounts for personal reasons?

There are no restrictions on the reasons for your withdrawals. For example, you can use the funds in your TFSA to buy your first home, travel around the world or cover unforeseen expenses.

Are there any withdrawal fees?

No. Fees would apply only for a transfer between National Bank and another institution.

Investments

Which types of products can be invested in a TFSA?

The investment products that are eligible for a TFSA are essentially the same as those that are eligible for an RRSP.

At National Bank, you can invest the following products in your TFSA:

  • Guaranteed Investment Certificates (GICs) with fixed or variable rates
  • National Bank Mutual Funds 1
  • Investments eligible for a Self-Directed TFSA

1 National Bank Mutual Funds (the “Funds”) are offered by National Bank Investments Inc., a wholly owned subsidiary of National Bank of Canada. Commissions, trailing commissions, management fees and expenses all may be associated with investments in the Funds. Please read the prospectus of the Funds before investing. The Funds’ securities are not insured by the Canada Deposit Insurance Corporation or by any other government deposit insurer. For money market funds, there can be no assurances that a fund will be able to maintain its net asset value per security at a constant amount or that the full amount of the investment in a fund will be returned. The Funds are not guaranteed, their values change frequently and past performance may not be repeated.

Differences between a TFSA, an RRSP and a non-registered account

Why is the TFSA often compared to an RRSP?

TFSAs and RRSPs have many similar features. For example, the income generated by the investments within the plan or account is not subject to income tax.

However, the TFSA does not replace an RRSP. Instead, a TFSA and an RRSP are complementary parts of an optimum retirement strategy.

How is the TFSA different from an RRSP?

Here are the main differences:

  TFSA RRSP
Minimum age 18 None
Maximum age None 71
Annual contribution limit $5,000 (2011)
$5,000 (2012)
$5,500 (2013)
$22,450 (2011)
$22,970 (2012)
$23,820 (2013)
Tax deductible contributions

TFSA contributions cannot be deducted from your income.

Impact on eligibility for government programs (OAS, GIS, etc.)

Withdrawals are not included in the calculation of the clawback for government programs.
In other words, regardless of the amount you withdraw from your TFSA, you will be eligible for the same benefits.


Withdrawals are included in the calculation of the clawback for government programs.

How is the TFSA different from a non-registered savings account?

The income generated by the investments within a TFSA is not subject to income tax. In contrast, the income generated in a non-registered savings account is subject to income tax.
More information

Spousal contributions

Can I contribute to my spouse's TFSA?

You cannot contribute to your spouse's TFSA but you can transfer funds to your spouse so that he/she can make his/her own contribution. The income generated by those funds in your spouse's TFSA will not be subject to income attribution rules*.

*Attribution rules are income tax provisions that apply to an individual who transfers assets to a third party. Under those rules, the income earned on the transferred assets has to be included in the individual's income.

Contribute Now

Quick Contribution

TFSA - Cash Balance

Type

Guaranteed-capital

Investment horizon

No fixed term, transferable at any time

Risk level
Minimum investment

N/A

Return* (%)

1.100 %

CONTRIBUTE

  • Enjoy substantial leeway (funds can be transferred at any time into the investment solution that best meets your needs).
  • No administration fees.
  • To know the charges related to a TFSA, please consult the brochure to this purpose, being: Fees - Your Guide to Personal banking Solutions, section "Registered Plans".
  • To know our process of notification of charge increases or the introduction of new fees, please consult the brochure to this purpose, being : General Information and Agreement, section " Notice of Changes to Fees Listed in Your Guide to Personal Banking Solutions".
  • To know our process in dealing with complaints relating to the processing of charges for a TFSA product, please click here.
  • To be able to contribute, you need a National Bank account. To open an account, please visit one of our branches.

* Rate subject to change without notice.

Non-Redeemable GIC

RRSP and non-registered versions also available

Type

Guaranteed-capital

Investment horizon

6 months to 5 years

Risk level
Minimum investment

$500

Return (%) Term Rate Interest

6 months

 0.700 %

Simple

CONTRIBUTE

1 year

0.900 %

Simple

CONTRIBUTE

18 months

0.950 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

2 years

1.150 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

3 years

1.250 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

4 years

1.500 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

5 years

1.750 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

  • Interest rate is fixed for the entire term.
  • Interest paid annually or at maturity date.
  • Non-transferable.
  • Product eligible for deposit insurance from Canada Deposit Insurance Corporation (CDIC).
  • To know the charges related to a TFSA, please consult the brochure to this purpose, being: Fees - Your Guide to Personal banking Solutions, section "Registered Plans".
  • To know our process of notification of charge increases or the introduction of new fees, please consult the brochure to this purpose, being : General Information and Agreement, section " Notice of Changes to Fees Listed in Your Guide to Personal Banking Solutions".
  • To know our process in dealing with complaints relating to the processing of charges for a TFSA product, please click here.
  • To be able to contribute, you need a National Bank account. To open an account, please visit one of our branches.

Redeemable GIC

Non-registered version also available

Type

Guaranteed-capital

Investment horizon

1 year to 5 years

Risk level
Minimum investment

$500

Return (%) Term Rate Simple Interest

1 year

0.650 %

CONTRIBUTE

2 years

0.850 %

CONTRIBUTE

3 years

0.950 %

CONTRIBUTE

4 years

1.200 %

CONTRIBUTE

5 years

1.450 %

CONTRIBUTE

  • Interest rate is fixed for the entire term.
  • Interest paid annually.
  • Non-transferable.
  • Product eligible for deposit insurance from Canada Deposit Insurance Corporation (CDIC).
  • To know the charges related to a TFSA, please consult the brochure to this purpose, being: Fees - Your Guide to Personal banking Solutions, section "Registered Plans".
  • To know our process of notification of charge increases or the introduction of new fees, please consult the brochure to this purpose, being : General Information and Agreement, section " Notice of Changes to Fees Listed in Your Guide to Personal Banking Solutions".
  • To know our process in dealing with complaints relating to the processing of charges for a TFSA product, please click here.
  • To be able to contribute, you need a National Bank account. To open an account, please visit one of our branches.

Non-redeemable irregular term GIC

Type

Guaranteed-capital

Investment horizon

15 months to 58 months

Risk level
Minimum investment

$1,000

Return (%) Term Rate Interest

15 months

 1.150 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

20 months

1.250 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

37 months

1.650 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

51 months

1.650 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

58 months

2.100 %

Simple

CONTRIBUTE

Compounded

CONTRIBUTE

  • Interest rate is fixed for the entire term.
  • Interest paid annually.
  • Non-transferable.
  • Product eligible for deposit insurance from Canada Deposit Insurance Corporation (CDIC).
  • To know the charges related to a TFSA, please consult the brochure to this purpose, being: Fees - Your Guide to Personal banking Solutions, section "Registered Plans".
  • To know our process of notification of charge increases or the introduction of new fees, please consult the brochure to this purpose, being : General Information and Agreement, section " Notice of Changes to Fees Listed in Your Guide to Personal Banking Solutions".
  • To know our process in dealing with complaints relating to the processing of charges for a TFSA product, please click here.
  • To be able to contribute, you need a National Bank account. To open an account, please visit one of our branches.
     

Non-redeemable Escalarater GIC

Investment horizon

3 years

5 years

Type

Guaranteed-capital

Guaranteed-capital

Risk level
Minimum investment

$ 500

$ 500

Average rate

1.548 %

2.132 %

Return (%) Terme Rate Terme Rate

1st year

0.950 %

1st year

0.950 %

2nd year

1.400 %

2nd year

1.150 %

3rd year

2.300 %

3rd year

1.500 %

   

4th year

2.650 %

   

5th year

4.450 %

 

CONTRIBUTE

CONTRIBUTE

  • The interest rate increases each year.
  • Stable, predictable income.
  • Available with compounded-interest only.
  • Non-transferable and non-redeemable until maturity.
  • Not available in redeemable version.
  • Product eligible for deposit insurance offered by Canada Deposit Insurance Corporation(CDIC).
  • To know the charges related to a TFSA, please consult the brochure to this purpose, being: Fees - Your Guide to Personal banking Solutions, section "Registered Plans".
  • To know our process of notification of charge increases or the introduction of new fees, please consult the brochure to this purpose, being : General Information and Agreement, section " Notice of Changes to Fees Listed in Your Guide to Personal Banking Solutions".
  • To know our process in dealing with complaints relating to the processing of charges for a TFSA product, please click here.
  • To be able to contribute, you need a National Bank account. To open an account, please visit one of our branches.

Variable-yield GICs

RRSP and non-registered versions also available

Please visit one of our branches or contact our National Bank Investments Advisory Service at 1-888-270-3941 or 514-871-2082.

Contribute Now

Self-Directed TFSA

National Bank Mutual Funds, Stocks, GICs, Bonds, etc. (from National Bank Direct Brokerage)

With a Self-Directed TFSA account:

  • you can have a wide variety of investments,
  • equities, GICs, bonds, National Bank mutual funds, and other investments are eligible under the Income Tax Act.

Open