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BMO Annual TFSA Report: TFSA Adoption Among Canadians Increases 23 Per Cent in 2013

- The majority of Canadians claim to be knowledgeable about the TFSA, however just 11 per cent can identify eligible investments and only 19 per cent know the new annual contribution limit

TORONTO, ONTARIO -- (Marketwired) -- 12/19/13 -- BMO Bank of Montreal today released its third annual Tax Free Savings Account (TFSA) report, which found that half of Canadians (48 per cent) now report having a TFSA - up 23 per cent from 2012.

However, despite this impressive adoption rate, the study found that many Canadians remain unfamiliar with specific aspects of the program.

The study, conducted by Pollara, revealed:


--  TFSA holders plan to contribute an average of $3,625 this year
--  Canadian men and women are equally likely to have a TFSA, while those
    aged 65+ are more likely to have an account than Canadians in other age
    groups (53 per cent)
--  TFSA adoption is strongest in Western Canada (Alberta at 55 per cent,
    the Prairies and B.C. at 53 per cent each) and weakest in Atlantic
    Canada (34 per cent)
--  Canadians identified not having to pay taxes on withdrawals (33 per
    cent) and the ability to withdraw funds at any time (27 per cent) as
    being the key benefits of the TFSA
--  TFSAs are being used most often as a vehicle to save for retirement (47
    per cent) and as an emergency source of funds (43 per cent)
--  Cash is the most common instrument being held in TFSAs (57 per cent),
    followed by mutual funds (25 per cent), Guaranteed Investment
    Certificates (GICs) (23 per cent), stocks (14 per cent) and Exchange
    Traded Funds (ETFs) (5 per cent)

"When first introduced in the 2008 federal budget, the TFSA was described as a 'tax policy gem' that was good news for the country. Given the impressive adoption rate, it's clear that Canadians tend to agree," stated Christine Canning, Head of Everyday Banking Products, BMO Bank of Montreal. However, Ms. Canning did note that work still needs to be done to raise Canadians' knowledge about the program.

Canadians are still unfamiliar with TFSA specifics

The report found that, while 68 per cent of Canadians claim to be knowledgeable about TFSAs - up from 60 per cent in 2012 - many are still not familiar with specific aspects of the account:


--  Just 19 per cent know that the new contribution limit is $5,500 (up from
    $5,000)
--  Only 11 per cent correctly identified all six types of investments that
    are eligible to be held within a TFSA
--  Around half of Canadians stated that they know when TFSA contributions
    are taxed (52 per cent) and how much you are allowed to re-contribute
    after making a withdrawal (47 per cent)
--  One in ten (10 per cent) of TFSA holders have over-contributed since
    opening an account

"Being unaware of some of the specific rules around the TFSA can potentially lead to complications down the road," stated Ms. Canning. "For instance, those who over-contribute will be required to pay a tax of one per cent on the amount in excess of the limit. This can really add up, so it's essential that Canadians stay up to date on the specifics of the account."

Regional Breakdowns


----------------------------------------------------------------------------
                                                          % who can identify
                    % who report being                       all investments
         % who have      knowledgeable % who know the new   that can be held
Region       a TFSA     about the TFSA contribution limit      within a TFSA
----------------------------------------------------------------------------
National         48                 68                 19                 11
----------------------------------------------------------------------------
Atlantic         34                 64                 12                  7
----------------------------------------------------------------------------
Quebec           40                 54                 13                  9
----------------------------------------------------------------------------
Ontario          50                 74                 20                 12
----------------------------------------------------------------------------
Prairies         53                 74                 24                 13
----------------------------------------------------------------------------
Alberta          55                 73                 26                 14
----------------------------------------------------------------------------
B.C.             53                 70                 22                 13
----------------------------------------------------------------------------

TFSAs at a Glance

TFSAs allow Canadians to earn tax-free investment income to meet their savings needs. Key benefits of this registered plan include:


--  No minimum contribution required to open an account
--  Investors pay no income tax on investment returns earned in the account
--  There are no taxes on funds that are withdrawn
--  TFSAs can hold a wide range of investments
--  The federal government recently raised the 2013 annual contribution
    limit for a TFSA from $5,000 to $5,500

For more information on BMO's Tax Free Savings Account, please visit a BMO branch or online at www.bmo.com/home/personal/banking/bank-accounts/tax-free-savings.

Results cited in this release come from a Pollara survey with an online sample of 1,023 adult Canadians, conducted between November 29th and December 5th, 2013. The margin of error for a probability sample of this size would be +/- 3.1%, 19 times out of 20.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $537 billion as at October 31, 2013, and more than 45,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.

Contacts:
Media Contacts
Matthew Duffin, Toronto
(416) 867-3996
[email protected]

Amanda Robinson, Toronto
(416) 867-3996
[email protected]

Valerie Doucet, Montreal
(514) 877-8224
[email protected]

Laurie Grant, Vancouver
(604) 665-7596
[email protected]

Internet: www.bmo.com
Twitter: @BMOmedia

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