1. Tax-Free Savings Accounts
A powerful incentive to save
Budget Speech 2008
Welcome to CI’s presentation on the new tax-free savings accounts.
Canadians now have a new way to save with a Tax Free Savings Account. A TFSA is flexible, registered general-purpose account that allows Canadians to save and earn tax-free investment income.
The TFSA was introduced in the 2008 federal budget as an incentive for Canadians to save.
It is a powerful incentive to save.
As the first account of its kind in Canada, it is the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan in 1957.
Why – because it provides Canadians with an opportunity to save and invest tax free.
And don’t we pay enough taxes already?

2. How does it work? Anyone 18-plus can save $5,000 a year
No tax on investment earnings
Money can be withdrawn at any time
Same investments as registered accounts
Withdrawals automatically added back to contribution room
Carry forward of unused contribution
How does it work?
Every Canadian, 18 and older can save up to $5,000 in a TFSA. Each year the annual contribution limit will be indexed to inflation and rounded to the nearest $500. For example, with a 2% rate of inflation, the first increase to $5,500 would occur in 2012.
With a TFSA, there is no tax on your investment earnings – income, dividends or capital gains – and you can withdraw the amount at any time, without paying tax.
Just like registered accounts, TFSAs can hold investments such as mutual funds, segregated funds, stocks, and bonds.
Any amount you take out of the account is added back to your contribution room the following year.
So, for example, if you had $10,000 in your account, and withdrew $4,000, the following year you would be allowed to contribute the $4,000, plus your annual contribution room of $5,000 – for a total of $9,000.
If you don’t use your contribution room, you can carried it forward to future years.

3. What is it?
An account where contributions are made with after-tax dollars and withdrawals are tax-free
Money can be earned in the account and withdrawn at any time without being taxed
What is it?
An account where contributions are made with after-tax dollars and all withdrawals are tax-free.
This means that money can be earned in the account and withdrawn at any time without being taxed.
Think of it as the opposite of an RRSP.
With an RRSP you receive a tax deduction for your contributions and any withdrawals you make are taxable at your current tax rate.
With a TFSA you make your contributions with after-tax dollars, so you don’t receive a tax deduction for contributions. However, any investment income you earn in the account is tax free.

4. TFSA vs. non-registered accounts
$200,000
$150,000
$100,000
$50,000 $0
Taxable
account
TFSA
Tax savings $41,862
$53,102
$94,964
TFSA versus non-registered account
This chart shows the difference between saving and investing in TFSA and a non-registered account.
If you contribute $5,000 a year for 20 years to a TFSA, you would enjoy a total tax savings of $41,862 compared to a non-registered account.
$100,000
$100,000
Contributions
After-tax investment income
Assumes a $5,000 annual contribution for 20 years, a 6% rate of return and an average tax rate of 35%.

5. TFSA or RRSP? Depends on: Your tax rate when you are contributing and
Your tax rate when you are withdrawing
Should you contribute to a TFSA or a RRSP?
That depends on your tax rate when you make the contribution and the rate of tax you will be paying, or expect to be paying when you are withdrawing the money.
Since most people receive a tax refund when the contribute to their RRSP, it also depends on how you use your refund.
Is it used for a large purchase, to pay down your mortgage, to pay for a vacation, or does it ‘just disappear’?
Do you use it to pay down debt, or invest it – either back into your RRSP, or into a non-registered account?

6. TFSA or RRSP? How to decide
If projected retirement income is:
Lower than current income RRSP
Similar to current income TFSA or RRSP
Higher than current income TFSA
How do you choose between a TFSA and an RRSP?
It comes down to your marginal tax rate – that is the rate of income tax you pay on the last dollar you earn.
What is your MTR expected to be at the time you withdraw money compared to when you contribute it?
And how is your tax refund used. If it’s not reinvested, then you are not saving with pre-tax dollars and the benefit is lost.
Generally, if your retirement income is projected to be lower than your current income, an RRSP has an advantage.
If your retirement income is likely to be similar to current income, then an investment in either vehicle is equivalent.
But, if your retirement income is likely to be higher than your current income, then a TFSA has the advantage.

7. TFSA beats RRSP Maximize TFSA in low taxation years
Worried about government clawbacks from income-tested benefits (OAS, GIS, Child Tax Credit)
Ideal for emergency fund, saving for a home or to finance spending
TFSA beats RRSP
A TFSA will beat an RRSP when your eligibility for income-tested benefits such as Old Age Security and the Guaranteed Income Supplement come into the picture. Unlike income from an RRSP or RRIF, which are included when calculating these benefits, withdrawals from a TFSA do not affect the level of benefits received.
A TFSA is better in low income years when less tax is being paid.
Also, its much better as an emergency fund or when investments are used for short-term purposes.
It should always be kept in mind that every individual faces different circumstances and financial needs.

8. Comparing investment vehicles
Retirement
Tax Equal Tax Lower Tax Higher
RRSP TFSA RRSP TFSA RRSP TFSA
Marginal tax rate
(contribution/retirement)
40%/40%
40%/30%
30%/40%
Contribution (before tax)
$1,000
Tax payable $0
$400
$300
Net contribution
$600
$700
Investment income
$2,207
$1,324
$1,545
Market value*
$3,207
$1,924
$2,245
$1,283
$962
Account value (after-tax)
*Assumes annual 6% return over 20 years.
Comparing investment vehicles
Here we have shown how different tax rates during your working years and at retirement can affect the outcome.
The first two columns show what happens with a $1,000 investment when the marginal tax rate is the same during both periods.
At the end of the day, the after-tax money is equal at $1,924.
The second two columns show what happens when the MTR is higher – we assumed 40% – during the working years and lower – we assumed 30% during retirement.
Clearly, the RRSP has the advantage because the money is taxed at a lower rate upon withdrawal.
Finally, the last two columns show what happens when the MTR is lower – again 30% – during the working years and higher – 40% in the retirement years.
Here, with the lower tax rate during the working years, the TFSA gains the advantage.
The amount of the tax savings you save will depend on the spread between the two marginal tax rates. The greater the spread, the bigger the savings in one vehicle of the other.

9. It’s all about flexibility
Use both
Some years, keep income down to minimize clawbacks
Other years, a higher income to make use of tax credits
Ability to decide whether or not to pay tax on withdrawals
Having a TFSA and RRSP makes sense
It’s all about flexibility
Use both
You will probably want to have both a TFSA and an RRSP.
In some years, for example, your may want to keep taxable income down in order to maximize your government benefits.
And in other years you may want a higher taxable income in order to make use of tax credits.
Having both a TFSA and an RRSP makes good sense.
It's all about flexibility.

10. Who can benefit?
Workers with pension plans and little RRSP contribution room
High-income earners, who have maximized RRSP contributions
Seniors, to avoid clawbacks
Anyone ineligible for RRSP contributions
Income splitting and estate planning
Who can benefit?
A TFSA can supplement your savings on a tax-assisted basis if you are a high income earner, or you have maximized your RRSP contribution, or you might have an employer pension plan so you can’t contribute very much to an RRSP because of a large pension adjustment, or you may not be allowed to contribute to an RRSP because you have no earned income,.
Income earned in a TFSA and withdrawals do not affect your eligibility for income-tested benefits, such as OAS, GIS, and the Canada Child Tax Credit.
Attribution rules don’t apply, so individuals looking for a way of income splitting, can provide TFSA contributions for a spouse or an adult child.
Assets can be transferred to the TFSA of a spouse or common-law partner upon death without affecting their TFSA contribution room.
Legislation is pending, at the provincial level, on tax-free transfers to beneficiaries upon death. Currently, a beneficiary must be named in a will.

11. Making an investment decision
Income – for investors seeking stability and income, income funds offer low volatility and steady distributions.
Short to medium-term investments – for investors with short to mid-term horizons who are seeking potential for growth as well as capital protection.
Long-term investments – for investors looking for tax-efficient long-term investments that provide potential growth.
Tax-Free Savings Accounts can be valuable financial planning tool.
They can be used in many ways – to supplement income, as a parking spot for short or medium-term savings for a specific purpose, or for long-term investments. CI Investments has a product solution to meet every need.
Since TFSAs are an excellent way to save for a house or for future education needs, they can provide a great alternative to tapping into an RRSP.
TFSAs can be used for:
Short term or for income – clients should look to less volatile investments, to minimize fluctuations in the value of their assets and for investments that produce interest income.
Long term – clients should look to equities because of the potential higher rate of return for tax-free compounding.

12. Managed Solutions
Seven strategic asset allocation funds designed to maximize returns for a given risk tolerance
Diversified across asset classes, regions and styles to reduce performance swings
One-ticket solution that offers award-winning managers and simplicity
Managed Solutions
CI offers two distinctly different managed solutions
Portfolio Series
Portfolio Series is a family of seven strategic asset allocation funds designed to maximize returns for a given risk tolerance. They are suitable for a range of investors. The portfolios achieve their objectives by investing in a mix of CI mutual funds and providing diversification by asset class, region and economic sectors. Minimum investment $500.
An excellent solution for a TFSA because it provides diversified portfolios for a variety of objectives, even with small investments.
Portfolio Select Series
Portfolio Select Series is a comprehensive investment program that combines the power of strategic asset allocation with exclusive, innovative features. It has the flexibility to allow you to create optimal investment portfolios tailored to your client’s investment objectives and risk tolerance, or to select from one of nine managed solutions. Portfolio Select Series is designed for high-net-worth investors and is suited for those who are retired and those saving for retirement. Minimum investment $50,000.
A TFSA can be combined with other PSS accounts to reach the minimum investment.
Comprehensive investment program combining the power of strategic asset allocation with exclusive, innovative features
Combine a TFSA with another PSS account to meet the $50,000 minimum investment

13. Investment Solutions Guaranteed income for life
Guaranteed 5% annual bonus every year for up to 15 years, plus automatic resets lock in market gains every three years
Combine a TFSA with another GMWB contract to meet the $25,000 minimum
Income funds – short-term stability, diversified monthly income
Signature Short-Term Bond Fund
Signature Dividend Fund
Signature High Income Fund
Signature Canadian Bond Fund
Equity funds – long-term growth
Broad range of asset classes, investment styles and geographic regions
Investment Solutions
SunWise Elite Plus – guaranteed income for life
Guaranteed 5% annual bonus every year for up to 15 years, plus automatic resets lock in market gains every three years
Combine a TFSA with another GMWB contract to meet the $25,000 minimum
CI Investments mutual funds
Income funds – short-term stability, diversified monthly income
Signature Short-Term Bond Fund
Signature Dividend Fund
Signature High Income
Equity funds – long-term growth
Broad range of asset classes, investment styles and geographic regions

14. Thank you
®CI Investments and the CI Investments design are registered trademarks of CI Investments Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of all distributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.