Experts Push for Life Annuities in Canadian TFSAs

Advocates urge the federal government to update tax laws to allow life annuities within Tax-Free Savings Accounts.

Updated on Oct. 29, 2026 in Retirement Planning

Experts Push for Life Annuities in Canadian TFSAs

Live Poll

Should the government allow more types of retirement investments to be held in tax-free accounts?

The C.D. Howe Institute and CALU are calling on the federal government to permit life annuities in Tax-Free Savings Accounts. This change would protect retirees against longevity risk by providing guaranteed monthly income that is currently excluded from TFSAs.

Why it matters

Current regulations force investors to withdraw funds from TFSAs to purchase annuities elsewhere, which creates tax disadvantages for those saving for retirement. Allowing these products in TFSAs would provide a tax-free vehicle for longevity protection.

While term-certain annuities are currently allowed in TFSAs, the Income Tax Act prohibits non-commutable life annuities. Industry groups propose that Canadians be permitted to hold these products in their accounts starting at age 60 or 65.

The players

C.D. Howe Institute

This Toronto-based public policy think tank provides research and recommendations on Canadian economic and social issues.

CALU

Conference for Advanced Life Underwriting is an organization representing financial advisors and insurance professionals in Canada.

The details

Investors currently must move money out of a TFSA to buy an annuity, which can trigger tax complications. Advocates argue that integrating these products would better support those relying on TFSAs as their primary retirement savings vehicle.

In 2023, more Canadians contributed to TFSAs than to RRSPs.
The C.D. Howe Institute released its shadow budget last week.
The federal government is expected to release a budget next week.

Market Dynamics

The proposal marks a departure from established regulatory frameworks under the Income Tax Act that have historically restricted annuity types in registered accounts. It reflects a broader shift toward enhancing the role of TFSAs in long-term retirement security.

If adopted, this change would allow retirees to secure guaranteed monthly income without the need to manage withdrawals from a TFSA. It could also help some Canadians manage their total annual income to avoid potential clawbacks of Old Age Security payments.

The takeaway

Proponents argue that current rules unfairly hinder retirement security for those who rely on TFSAs. Savers should monitor the upcoming federal budget to see if these proposed structural changes to account accessibility become law.

What happens next

The federal government is expected to release its budget next week, which may reveal whether these recommendations for TFSA reforms will be considered.