|Canada's Minister of State of Finance Ted Menzies speaks during Question Period in the House of Commons on Parliament Hill in Ottawa December 15, 2011. (REUTERS/Chris Wattie)
OTTAWA - Savers will get a little extra room to sock away cash in their tax-free savings account (TFSA) next year, as the feds increase the $5,000 annual contribution limit for inflation.
Minister of State for Finance Ted Menzies is expected to confirm Monday that the built-in indexation for TFSAs will kick in for the first time in 2013, taking the maximum contribution to $5,500.
TFSAs can include a variety of investments, such as savings accounts, mutual funds and guaranteed investment certificates.
Any interest or other income they generate is tax free.
The Tories are quick to trumpet the popularity of TFSAs.
"Since our Conservative government introduced the TFSA in 2008, it has proven exceedingly popular and has been called the single most important personal savings vehicle since the introduction of the RRSP," Menzies told the Commons last month.
The federal government says 8.2 million people have opened a TFSA since its introduction, while around 2.5 million Canadians plough in the maximum contribution each year.
Still, the NDP has complained that while TFSAs are attractive for many, they do little for those with low incomes who either don't pay much income tax, or don't have enough extra dollars to take full advantage of the accounts.
The Conservatives, meantime, have pledged to sweeten TFSAs even more by doubling the annual limit once the federal budget is balanced.
With the budget possibly still in the red by 2015, the Tories admit it will likely be several years before they keep that promise from the last election campaign.