GICs in RRSPs at smaller FIs

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SoninlawofGus
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GICs in RRSPs at smaller FIs

Post by SoninlawofGus »

I've been thinking about the "end game" for my GICs in RRSPs at smaller institutions. I have GICs of various amounts and maturity dates. Like many others here, I had a bad experience with ING and Ally, which then became Tangerine and RBC, respectively, both of whom slashed rates and introduced transfer-out fees. In the case of Tangerine, I've been able to partially manage the issue by carefully coordinating the maturity dates of my GICs, some of which will ultimately land briefly in the Tangerine RRSP Savings Account. Once all of my funds have matured, I can transfer the amount all-at-once, and pay only one fee. This requires some math to determine when it's worth the trouble, and how to align the dates, and with Tangerine's abysmal short-term rates, I'm getting well below inflation for some of the renewed short stuff.

While this approach will work somewhat for Tangerine, I've noticed that People's Trust and Oaken do not have RRSP Savings Accounts -- no place were various GICs could eventually be aggregated (if that become necessary). That means, I believe, that I'm stuck with either renewing them with Peoples Trust or transferring my GICs out at maturity one at a time. While transfers currently are managed on a no-fee basis, that could change at any time.

At this point, the rates are so much better at the smaller FIs, it's probably well worth the risk of future transfer-out fees -- as it was for ING and Ally. Still, I'm wondering if people have considered this issue and how they plan to manage it.
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Re: GICs in RRSPs at smaller FIs

Post by brucecohen »

Do FIs charge transfer out fees on GICs bought through deposit brokers? Probably not. I haven't been active in the GIC market for years but it used to be the case that deposit broker customers got the same rates as those dealing direct -- and sometimes even better rates as small FIs use deposit brokers to raise cash quickly when needed.

I recall that many, many years ago each GIC placed for me by a deposit broker was set up as a stand-alone RRSP but I believe DBs are now able to offer self-directed RRSPs and RRIFs so that matured money can be moved among FIs without R-plan paperwork.

You'd face one more round of transfer fees as you move matured money to a DB but could then have fee-free mobility.
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Re: GICs in RRSPs at smaller FIs

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Interesting approach/tip. But the rates I tracked down for them sit squarely in between the smaller FIs and TDDI. Here's what I found for five-year rates:

TDDI: 2.22% [I think its ridiculous that TDDI continues to offer such uncompetitive GICs. ]
Deposit brokers (typical): 2.35%
iTRADE: 2.35%
Peoples Trust: 2.45%
Oaken: 2.5%

Even if I moved to a DB, I'd still have the problem of how to manage my existing GICs, which is not a problem if two conditions remains: (1) the rates continue to be attractive, and (2) there is no change to transfer fee policies. Even if transfer fees were introduced, if the rates remained high, I would probably remain with the FI indefinitely. All that said, I still wonder how to best manage the end game. I raise the issue now because in the coming year or so my maturing GICs will test the $100K threshold, so I'm going to have to start moving out whether I want to or not.

The thing about RRSPs is that most working folks such as myself get an annual contribution amount. That means I have many small/mid size GICs maturing at different times/years. Perhaps I should have started with a deposit broker, after all. I don't know much about them.I wonder if they now typically charge fees for anything, such as holding an RRSP account.
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Re: GICs in RRSPs at smaller FIs

Post by brucecohen »

SoninlawofGus wrote:I don't know much about them.I wonder if they now typically charge fees for anything, such as holding an RRSP account.
Here is their association's website. There's a directory of members so you can find some in your area.
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Re: GICs in RRSPs at smaller FIs

Post by SoninlawofGus »

Well, I've reached a decision. Upon maturity, I am going to move my smaller GIC purchases to either TDDI or iTrade. As soon as possible, I am going to open an iTrade RRSP, since they offer more competitive GIC options than TDDI (and currently on par with Deposit Brokers). For larger GICs (say over $20,000), I'll stick with the smaller FIs. That way, if fees creep in, my costs will be mitigated.

Has anyone experienced a scenario where an organization with no RRSP saving account introduced fees on GIC transfers at maturity? Say you hold a bunch of $1000 GICs with Peoples Trust and they introduced a $150 transfer out fee. Your transfer costs relative to the amount in the GIC "account" could become quite high real quick.
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Re: GICs in RRSPs at smaller FIs

Post by AltaRed »

There have been some reports at http://www.highinterestsavings.ca about transfer out fees (from at least registered accounts) at some insitutions. IIRC, I think Tangerine is one culpirt that came up, something like a $25 or $45 fee. I believe there were others.

Added: This comparison chart https://www.highinterestsavings.ca/comp ... ngs-banks/
Last edited by AltaRed on 30 Apr 2016 14:29, edited 1 time in total.
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Re: GICs in RRSPs at smaller FIs

Post by Bylo Selhi »

SoninlawofGus wrote:Has anyone experienced a scenario where an organization with no RRSP saving account introduced fees on GIC transfers at maturity? Say you hold a bunch of $1000 GICs with Peoples Trust and they introduced a $150 transfer out fee. Your transfer costs relative to the amount in the GIC "account" could become quite high real quick.
Financial institutions charge fees on registered accounts, especially when you want to move assets in kind, e.g. to move securities in an RRSP at one FI to another.

AFAIK no financial institution charges transfer out fees for cash in taxable accounts.

In the case of PT specifically, you create a regular savings account linked to an external account. When a GIC matures have them deposit the proceeds into that savings account, then move your money elsewhere.
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Re: GICs in RRSPs at smaller FIs

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Bylo Selhi wrote: In the case of PT specifically, you create a regular savings account linked to an external account. When a GIC matures have them deposit the proceeds into that savings account, then move your money elsewhere.
Unless I am mistaken, Peoples Trust and Oaken do not offer RRSP savings accounts. Effectively, each GIC is an "account."
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Re: GICs in RRSPs at smaller FIs

Post by AltaRed »

SoninlawofGus wrote:Unless I am mistaken, Peoples Trust and Oaken do not offer RRSP savings accounts. Effectively, each GIC is an "account."
I believe you are correct. But from the link I provided, it suggests PT does not yet charge a RRSP transfer out fee....but there is nothing to stop them from starting to do so. I avoid all of those issues by having only one RRSP, and at a discount brokerage,
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Re: GICs in RRSPs at smaller FIs

Post by SoninlawofGus »

AltaRed wrote: I believe you are correct. But from the link I provided, it suggests PT does not yet charge a RRSP transfer out fee....but there is nothing to stop them from starting to do so. I avoid all of those issues by having only one RRSP, and at a discount brokerage,
Exactly; all is well for now. But I think the flexibility of being able to aggregate various GICs, while getting close to the same rates through iTrade, has me partially sold on that option going forward. I do have some larger GICs that I am willing to let sit at Peoples Trust because the cost-benefit is there. But I have a few $3-5000ish GICs in various places that I would prefer not to leave out there. Plus, I agree with you about trying to keep things simple.
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