Finance Minister Bill Morneau confirms TFSA roll back

There was no mention of reducing the annual TFSA contribution in last Friday’s throne speech, however Finance Minister Bill Morneau confirmed the following Monday (December 7) that the $10,000 annual contribution limit would be rolled back to $5,500. In an interview with CBC Newsworld on Monday morning, Morneau stated that the $10,000 limit would remain in place for 2015, but starting January 1, 2016, the old $5,500 maximum would be in place.

In addition to the $10,000 limit remaining in effect for 2015, it will also be part of your lifetime contribution limit. This means that if you don’t contribute the full $10,000 this year, the remaining amount will still be available for future years.

Morneau also stated that the $5,500 limit will be indexed to inflation. The plan is to raise the limit by $500 increments as inflation erodes the “real” value of the $5,500 limit by $250 or more. To understand how this works, and assuming a 1.5% rate of inflation each year, the $5,500 value will be worth $82.50 less in real terms each year. This should result in a $500 increase in the limit approximately every three to four years

This post is intended for informational purposes only. It is not to be considered financial advice. Always do your research before making any investment decisions.

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