Publications, opinions, and speeches
The Canada Saver’s Credit
Published on 14/02/2019
A proposal to build financial security for lower- and modest-income Canadians
Lower- and modest-income Canadians face challenges when it comes to building asset wealth. Studies estimate that half of households have insufficient savings to stay above the poverty line for three months.
This report proposes a targeted policy intervention to help boost savings and build assets among lower- and modest-income Canadians: the Canada Saver’s Credit (CSC).
As things stand, the savings incentives in our tax system are “upside down.” The Government of Canada spends over $45 billion on tax expenditures to encourage people to save (through RPPs, RRSPs, and TFSAs), but most of this spending benefits middle- and upper-income Canadians. Lower- and modest-income Canadians saving in RRSPs receive minimal tax deductions for their contributions, and risk being subject to a punitive Guaranteed Income Supplement “clawback” of 50 per cent or more when they use these savings for retirement income.
A CSC could remedy this by providing lower- and modest-income Canadians with a refundable, dollar-for-dollar match of up to $1,000 per year for contributions into a TFSA. It would cost roughly between $275 million and $550 million (around 1 per cent of the $45 billion in current public expenditure on RPPs, RRSPs, and TFSAs).
The CSC would be a simple, flexible way to help Canadians with low and modest incomes increase their savings – whether to improve day-to-day financial security, make major purchases, or help prepare for retirement.