Why clients may have to wait for FHSAs

Editor’s note: This story now includes an announcement from Questrade made after this article was first published.

The date for Tax-Free First Home Savings Account (FHSA) eligibility has almost arrived, but Canadians may have to wait a while longer before they can open one.  

Banks and other financial firms are scrambling to set up back-office systems and internal procedures to allow them to offer the account, which by legislation becomes effective April 1, 2023.

The legislation to enact the FHSA received royal assent on Dec. 15, 2022, leaving firms with a tight schedule to launch the accounts.

Josée Baillargeon, senior policy advisor, taxation, with the Investment Funds Institute of Canada (IFIC) in Toronto, said that IFIC and member firms have been working “collaboratively” with both the Department of Finance and the Canada Revenue Agency (CRA) as they prepare to launch the accounts.

“Many issuers will build their systems out to meet requirements [for the FHSA], starting with basic features, and will continue development as more information is provided by CRA,” Baillargeon said in an email.

Baillargeon estimated that some firms would need additional months to launch: “Due to the complex nature of this new plan, more data points must be collected which will require new fields to be created. This translates to more time required to build.”

Direct investing firm Questrade has stated that they will launch the FHSA on April 1.

Financial firms have been promoting the new plans on their websites even as they continue to work on launching them, with some offering to alert clients when they’re available.

Fidelity has been running a contest, which closes April 24, on its website offering Canadians who submit their name and contact details a chance to win $8,000, which could be used to fund an FHSA.

Chris Pepper, vice-president of corporate affairs for Fidelity Investments Canada, said in an email that the full details of the firm’s expected launch of the account this spring are still being worked out.

Royal Bank of Canada also said it expects to launch FHSAs this spring, while other financial firms surveyed by Advisor.ca said they’ll offer their accounts later this year.

Desjardins said it expects to launch its account by the summer. The implementation of the FHSA “requires significant technological development as well as coordination with the CRA,” the financial cooperative said in a statement.

In the meantime, Desjardins has been offering clients a “pre-FHSA” account where they can park money they’ve set aside for the FHSA at a promotional high-interest rate.

The FHSA provides first-time homebuyers the ability to save up to $40,000 on a tax-free basis, with an annual contribution limit of $8,000. To open an FHSA, an individual must be a Canadian resident aged at least 18 and not have owned a home during the current year or preceding four calendar years.

Regardless of when an eligible person opens an FHSA this year, they will have access to $8,000 of contribution room. Unused FHSA contribution room can be carried forward, up to a maximum of $8,000, but contribution room begins to accrue only after an account has been opened.