Montreal – Tax-free savings accounts (TFSAs) were designed, in part, to help lower-income Canadians optimize their retirement savings, but many are still leaving money on the table, says a new publication from the Institute for Research on Public Policy.

As Canada’s population ages, a growing number of seniors will need to rely on government programs like the Guaranteed Income Supplement (GIS), in addition to their personal retirement savings, to support a reasonable standard of living. But many future low-income retirees are still not using TFSAs in ways that would allow them to benefit fully from such programs, according to Richard Shillington, an Ottawa-based statistician.

The main advantage of TFSAs is that income earned in a TFSA and withdrawals from it do not affect eligibility for federal income-tested benefits and credits. By contrast, RRSP savings are counterproductive for future low-income retirees because nearly all their registered savings will be clawed back, directly through taxes and indirectly through benefit reductions.

“Too many future GIS recipients are not getting the advice they need to shed their RRSPs and some are still, wastefully, saving in them,” says Shillington. Since 2008, only 36 percent of workers without an employer-sponsored pension plan have opened a TFSA. Given the potential benefits of TFSAs for low-income seniors, we should be seeing a significant movement away from savings in RRSPs and toward TFSAs among Canadians likely to qualify for the GIS. This has not occurred to the extent policy-makers envisioned when TFSAs were introduced, says Shillington.

He concludes that policy-makers need to focus their efforts on improving the take-up and use of TFSAs among low-income savers. A combination of default savings options in the workplace, tax incentives and even a “savers credit” could help nudge Canadians to save more effectively and optimize their retirement income.

Are Low-Income Savers Still in the Lurch? TFSAs at 10 Years, by Richard Shillington, can be downloaded from the Institute’s website (

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