To the editor:
When the Tax Free Savings Account (TFSA) was announced a couple of years ago, the intent, and I am putting words into the Conservative Party’s mouth, seemed sound: To get people to save and be ready for rising interest rates on mortgage renewal, to help avoid another economic meltdown and, especially with the large population of boomers nearing retirement, to counteract the dismal stats reflecting the lack of adequate pension plans and rising necessity for health care related goods and services with concomitant rising privatization and costs.
It was simple—$5,000 maximum cumulative contribution per year with no tax on the income these savings generated.
And, unlike RRSPs (read Right to Rip off Savings of People by the banks with low rates and high fees) since the contributions were not deductible and therefore not to be included in taxable income on withdrawal, there would be no justification for bank administration fees.
TD Waterhouse has just announced it is charging a $25 fee on the second withdrawal each year, even if it is only the income not the principal. Their rationale? The CRA (Confusing Revenue Accounting) counts it as a withdrawal, and even though it’s tax free, TD Waterhouse also counts it as a withdrawal, and therefore subject to a fee.
And that about takes care of the tax savings.
Part of the problem lies with the hasty introduction of the TFSA by Revenue Canada. They didn’t foresee the cumulative implications of withdrawals and are making up the rules as they go along.
Even the top pundits are not clear on them.
The new rule is you can recontribute a withdrawal only in the following year.
I have done a phone survey of all the banks and investment firms listed in our local phone book and TDW (and TD Bank) is the only one charging any fee.
But the door is open for others.
I urge everyone to be vigilant and lobby your MPs for regulations forbidding these unjustifiable and exorbitant fees that, to me, defeat the intent of these registered plans.
MP Ron Cannan’s inadequate response was: “You can always move your money elsewhere. We have the best banking system in the world.”
I think he is confusing the Bank of Canada with private banks.
I will keep trying.