Open Letter to Finance Minister Bill Morneau on why middle class and seniors need larger TFSA limits

The following is an Open Letter addressed to the new Finance Minister, Bill Morneau. It is republished here with the permission of the writer, Gordon P. Johnson (coordinates below). It addresses a topic we’ve been looking at in depth ever since the election: the Liberal promise to cut the annual TFSA contribution almost in half, from $10,000 to $5,500. He points out that preserving the TFSA limit at the higher amount will benefit the very people the Liberal party has said it wishes to help: the middle class and seniors. Because this is an open letter, we have not edited the letter nor attempted to add subheadings to break up the text. 

Dear Mr. Morneau,

Finance Minister Bill Morneau (Liberal Party of Canada)

First of all I wish to congratulate you on your recent Cabinet post.

Mr. Trudeau stated that should he form the next government of Canada he would reduce the recently increased TFSA limit from $10,000 to the previous level of $5,500.

His reasoning is that the $10,000 limit only benefits the wealthy and not the average middle class taxpayer. I contest that this declaration is a political move and not at all in the best interests of the average middle class person.

He spoke of reducing taxes both for the middle class and the senior population.

Let’s look at the TFSA account and how it potentially benefits the very people he claimed that he wished to help (middle class and seniors). Not only does it benefit through compounding tax free gains (both short term as well as long term) but it reduces the tax burden at retirement when needed the most.

Let’s assume that your average middle age, middle class taxpayer is earning $50,000 and struggling to save for retirement. He certainly isn’t contributing his maximum to a TFSA – most likely he isn’t contributing anything to his TFSA.

His/her parents, possibly seniors on a fixed income, have accumulated some savings and have a clear title home. Their savings are invested and the income is taxable. If the savings were placed into a TFSA that income would be tax free—a significant benefit to seniors trying to maximize their cash flow.

However, the real benefit to the middle age, middle class wage earner is the carry forward of unused TFSA contributions. Let’s say that upon his or her parents passing they inherit $250,000. These funds are after tax and there is no benefit to placing them in an RRSP.

With the TFSA $10,000 annual contribution announced for 2015 the current accumulated total is $41,000 and will rise to $101,000 by 2021 ($74,000 should TFSA contributions be rolled back to $5,500). Should that happen to be the year their inheritance arrives – a couple would be able to contribute $202,000 into their TFSA. Since these funds are already after tax it would make sense to utilize the TFSA accounts to shelter any future growth.

Furthermore, it is becoming more commonplace for the inheritors to be retired themselves by the time their parents pass on. These funds would now be able to generate tax free income to the benefactors of these funds. It would reduce the tax burden on the seniors both now (parents) and in the future (inheritors).

Please do not let political agenda cloud common sense. DO NOT REDUCE THE CURRENT $10,000 CONTRIBUTION LIMIT. The TFSA is the most beneficial savings vehicle available to the middle class and seniors and needs to be protected at all costs.

An Angus Reid survey recently found that 67% of Canadians are not in favour of reversing the increase. Perhaps if Canadians realized the benefit of the carry-forward provisions even more would be in favour of keeping the level at $10,000.

You are aware of the CPP proposed enhancements. I would suggest that the tax savings afforded by the TFSA carry forward provision would off-set increases to the CPP and be a better solution in the retirement planning of Canadian seniors.

Thank you for your consideration.


Gordon P. Johnson

#179-16080-82nd Ave., Surrey, B.C., V4N 0N6

(604) 597-3680,

November 4, 2015

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