Affiliated with National Financial Insurance Agency Inc.

1. Introduction of a new savings vehicle that will allow Canadians to save money on a completely tax-exempt basis for any purpose. Starting in 2009, all Canadians over the age of 18 with a valid social insurance number will be able to contribute to a Tax-Free Savings Account (TFSA). There will be no limit on how many TFSAs you can set up. The maximum amount allowed will be $5000. per year, indexed annually. Any unused amount will be cumulative and be carried forward indefinitely. Any amounts withdrawn from your TFSA will be tax-free and will be automatically added to your TFSA contribution room for the following year.
    
2. Increased flexibility for those of you holding a locked-in pension plan under the federal legislation. The 2008 federal budget proposes to allow individuals to access funds from their federal life income funds (LIF) in three circumstances: small balances, financial hardship and one-time unlocking. If the individual is at least 55 years of age with LIFs worth less than $22,450., he/she will be able to cash in the full amount or convert it to another tax-deferred savings vehicle, such as an RRSP or RRIF, which there are no maximum withdrawal limits. If the balance in your LIF is more than 22,450., individuals over the age of 55 can also unlock up to 50% of their LIF holdings and transfer the funds into their RRSP or RRIF. Any LIF holder, regardless of age, facing financial hardship (low-income individuals, or individuals with high disability or medical –related costs) can unlock up to $22,450. (indexed annually).
    
3. RESPs: The government is extending some of the time limits associated with RESPs to provide additional flexibility to students. Under the current rules, contributions to an RESP can be made for 21 years following the year in which the plan is entered into. An RESP must be terminated by the end of the 25th year following the opening of the plan. The federal budget announced that it would immediately extend these deadlines by 10 years. The government has also relaxed the rules surrounding Educational Assistance Payments (EAPs). Currently, a student could only receive an EAP if at the time of the payment, he or she was enrolled as a student in a qualifying post-secondary program. The budget now proposes a six-month “grace period” for receiving EAPs. This rule would allow an RESP beneficiary to receive EAPs for up to six months after ceasing to be enrolled in a qualifying program.

Theresa Wever and the Money Concepts Team.