The new first home savings account may work better in conjunction with a group registered retirement savings plan or group tax-free savings account rather than as a stand-alone product, says Eric Monteiro, senior vice-president of group retirement services at Sun Life Financial Inc.

“The [FHSA] limit is kind of low — it’s a $40,000 lifetime maximum and $8,000 annual, so it’s a great product for someone who’s already using and maximizing some of the other [savings] vehicles.”

The FHSA, which was announced in the federal budget and became available through financial institutions in April, allows Canadians to accumulate tax-free savings, within certain limits, towards the purchase of a first property.

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While Sun Life is considering adding FHSAs to its capital accumulation plan offerings, Monteiro says many plan sponsor clients that already offer a group TFSA have inquired about the distinct advantages of FHSAs. Indeed, he notes under-utilized group TFSAs may represent an untapped resource for plan members looking to purchase their first home.

A 2021 report based on findings from Sun Life’s CAP sponsor database found that, among CAP members with a TFSA, just seven per cent contribute to the account and 55 per cent of these members have invested less than $5,000.

“The question [that plan sponsor clients] are asking is, ‘It’s great that we have this new product, but people aren’t using TFSAs.’ Other than not being able to deduct contributions, TFSAs provide all the benefits and the limit is much higher — in fact, it doesn’t have the lifetime limit [that FHSAs do]. Everyone is saying, ‘Shouldn’t we push TFSAs pretty hard before we actually put [FHSAs] in the plan?’”

During a session at Benefits Canada‘s 2023 DC Plan Summit in February, Jaye Calder, PepsiCo Canada’s manager of Canadian benefits and retirement, said the organization is currently exploring the possibility of integrating FHSAs into its defined contribution pension plan.

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“I really think the design is pretty cool in that it offers ultimate flexibility for the future to figure out what new accounts [are] beneficial for our employees, what speaks to them [and] how we can get them engaged in retirement and caring about saving,” she said.

In an emailed statement to Benefits Canada, a spokesperson for Desjardins Insurance confirmed the insurer is adding FHSAs to its CAPs and will likely begin offering the account through its workplace retirement plans in 2024.

“This product would provide an additional mechanism to best support plan members with broader savings goals than retirement,” said Jen Gorman, senior public relations advisor at Desjardins, in the statement. “By providing solutions that can help plan members buy their first home, [plan sponsors] are further engaging plan members in their programs as they connect to their unique realities while contributing to their financial empowerment.”

In a separate statement, iA Financial Group confirmed it isn’t currently offering FHSAs, but it may add the product to its CAP offerings in the future.

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