loseup portrait senior man protecting a piggy bank

Many people who would benefit from tax-free savings accounts (TFSAs) aren’t using them, according to a paper from the Institute for Research on Public Policy (IRPP).

Unlike with a registered retirement savings plan (RRSP), income earned in a TFSA and withdrawals from it do not affect a person’s eligibility for income-tested credits and benefits, like the Guaranteed Income Supplement (GIS). This is particularly helpful to future low-income retirees, since nearly all their registered savings will be clawed back either directly through taxes or indirectly through benefit reductions.

Still, according to the IRPP, only 36% of workers without employer-sponsored pension plans have opened a TFSA since 2008.

“Too many future GIS recipients are not getting the advice they need to shed their RRSPs and some are still, wastefully, saving in them,” report author Richard Shillington said in a release.

The IRPP paper suggests that policymakers consider options such as tax incentives and credits to encourage Canadians likely to qualify for the GIS to save more effectively.

Read the full report here.