1. Tax-Free Savings Accounts
A new way to save
Welcome to CI’s presentation on the new tax-free savings accounts.
TFSAs may be a small market initially, but as Canadians adapt to a new way of saving, it is expected that the market will grow to $115 billion within five years. The tax savings for Canadians during that time could be as much as $2 billion.
Over the course of this presentation, we will provide you with the basics of TFSAs, explain how they work, who the target markets are, and how to position this new savings vehicle to your clients.
We will also explain the differences between TFSAs and RRSPs and how both can be used in the most beneficial way by your clients.
Finally, we will cover the changes we have made to some of our products in order to accommodate TFSAs.
Let’s get started.

2. TFSA defined An account where investment earnings are not taxed
Annual $5,000 maximum contribution level
Amounts can be withdrawn at any time
Withdrawals are added back to contribution room
Account growth turns into contribution room
Does not affect income-tested benefits (Old Age Security, Guaranteed Income Supplement, Child Tax Benefit)
Simply, a TFSA is a savings account where investment earnings are tax exempt.
The maximum contribution is $5,000 a year – which is indexed to inflation in multiples of $500.
Canadians 18 and older can open an account, but an income tax return must be filed in order to be eligible, even if there is no income.
Any amount – principal or earnings – can be withdrawn at any time.
And withdrawals are added back to contribution room. For example, if an individual contributes $5,000, which grows to $6,500 and they withdraw the entire amount, $6,500 is added back to their contribution room the following year. This way account growth translates into contribution room – of course if the account drops to $4,500 and it is withdrawn, then $500 of contribution room is lost.
Income earned within a TFSA and withdrawals do not affect eligibility for federal income-tested benefits, such as OAS, GIS and the Child Tax Benefit.

3. TFSA defined
No attribution, money can be given to a spouse or child (18 and over) to contribute
Unused contribution room can be carried forward
Over-contributions are penalized
Tax-free transfers to a spouse’s TFSA upon death
Contributions can be made in-kind
TFSAs can be used as collateral for loans
Attribution rules do not apply, so contributions can be provided to a spouse, common-law partner, or adult child for their TFSA.
Like RRSPs, unused contribution room can be carried forward and over contributions are penalized at 1% per month.
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.
Similar to RRSPs, contributions can be made in-kind – but capital gains or losses must be crystallized before transferring to TFSA.
TFSAs can be used as collateral for loans.
Unlike other non-registered investments, interest paid on investment loans is not tax-deductible.

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
This chart compares the earnings for a TFSA and a non-registered account.
Because capital gains and other investment income earned in a TFSA are not taxed, if an individual contributed $5,000 a year for 20 years to a TFSA, they 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 – RRSP in reverse RRSP Tax deduction for contribution
All withdrawals taxable
TFSA
No deduction for deposits
Investment returns not taxed
You may want to think about a TFSA as the reverse of an RRSP.
RRSPs are made with pre-tax dollars and withdrawals are taxable.
TFSAs are made with after-tax dollars and there is no tax on withdrawals, so investment returns are tax-free.

6. Comparing investment vehicles
TFSA
RRSP
For virtually all savings and investment objectives
Primarily for retirement savings
Contributions are made with after-tax income
Contributions are tax deductible
Contribution room is added back when withdrawals are made
Contribution room is used up when withdrawals are made
Withdrawals are tax free
Withdrawals are added to income and taxed at your current rate
Here is a comparison of the key features of both TFSAs and RRSPs.
One key difference is the treatment of withdrawals.
Suppose your client needed to withdraw $20,000 from either account.
If the money is withdrawn from a TSFA, they receive the full amount and the money can be recontributed in the future without affecting contribution room.
If the amount is withdrawn from an RRSP, they would need to withdraw as much as $37,000, depending on their marginal tax rate, in order to pay the tax. Their contribution room would be lost forever.
As we said earlier, contributions can be made in-kind and the same rules apply for both TFSAs and RRSPs.
No requirement to withdraw at any age
Contributions cease at age 71
Contributions can be made any time for those age 18 and older
Must be converted to a RRIF by age 71; withdrawals after that age are mandated according to a schedule based on age
Annual maximum contribution – $5,000 indexed to inflation
Annual maximum contribution – 18% of earned income in the previous year to a maximum of $21,000 in 2009

7. TFSA or RRSP? If projected retirement income and MTR TFSA beats RRSP
Lower than current income – an RRSP
Similar to current income – a TFSA or RRSP
Higher than current income – a TFSA
TFSA beats RRSP
When eligibility for income-tested tax credits and benefit programs are a factor
When there are low income years
As an emergency fund or for short-term savings
How do you choose between a TFSA and an RRSP?
It comes down to the individual’s marginal tax rate.
The question is: ‘What is the MTR expected to be at the time of the withdrawal compared to when they contribute?’
Another question is: ‘How is the tax refund used?’ Because if it’s not used to pay down debt or reinvested, then they are not saving with pre-tax dollars and the benefit is lost. Clients are actually going to be paying tax twice – once when they invest in their RRSP and again when they withdraw the money from a RRIF.
Generally, if retirement income is projected to be lower than an individual’s current income, then an RRSP has an advantage.
If retirement income is likely to be similar to current income, then an investment in either vehicle is equivalent.
But, if retirement income is likely to be higher than current income, then a TFSA has the advantage.
A TFSA will beat an RRSP when an individual’s eligibility for income-tested benefits such as OAS and the GIS 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.
Here we have shown how different tax rates during the 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 will depend on the spread between the two marginal tax rates. The greater the spread, the bigger the savings in one vehicle or the other.

9. It’s all about flexibility
Use both
Some years keep income down to minimize clawbacks
Other years a higher income to take advantage 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
Clients will probably want to have both a TFSA and an RRSP.
In some years, for example, your client may want to keep taxable income down in order to maximize their government benefits.
And in other years they may want a higher taxable income in order to take advantage 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 and low-income individuals to avoid clawbacks
Anyone ineligible for RRSP contributions
Income splitting and estate planning
A TFSA can supplement savings on a tax-assisted basis, for high income earners, or those who have maximized their RRSP contributions, or those with employer pension plans who may have very little contribution room because of a large pension adjustment, or may not be allowed to contribute to an RRSP because they have no earned income.
Income earned in a TFSA and withdrawals do not affect the 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 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. How to position a TFSA with clients
Tax-free income regardless of investment
Flexible enough to meet any financial plan or investment objective
TFSA or RRSP – every client will need their own strategy
If clients don’t have cash, in-kind contributions can be made from non-registered investments
How to position a TFSA with clients
Tax-free income – regardless of investment. Whether it is used as an emergency fund, or part of a retirement solution, a TFSA can provides tax benefits to any Canadian.
Flexible enough to meet any financial plan or investment objective.
Every client will need their own strategy – when to use a TFSA and when to use an RRSP – it’s a question of their individual tax rate.
If clients don’t have cash, they can make a in-kind contribution from existing non-registered investments.

15. 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.