Goodbye Canada Retirement Savings Plan, Hello ING Direct RRSP

For me, investing includes emotions not just facts. I like Canada Savings Bonds. My parents invested each of our “Baby Bonuses” into CSBs and those same bonds later helped pay for my engineering degree. When I started working, I enrolled in the Canada Savings Bond payroll deduction plan and each year I’d get some new bonds with the money that was taken from my cheques before I could see it, want it or spend it. Later, when we were cash-short to make RRSP contributions, my husband and I would transfer some of our CSBs directly by phone to the Canada Retirement Savings Plan. The tax receipt would arrive a few days later in the mail. So it’s with sadness that I am finally saying goodbye to the Canada Retirement Savings Plan and to the last of my Canada Savings Bonds; But I’m also saying hello to an old friend, our ING Direct, now called, RRSP account, which is offering me a bonus right now.

Why Am I Closing Our Last Canada Retirement Savings Plan Account?

I moved the bulk of our RRSP money invested in our Canada Retirement Savings Plans out a few years ago. I moved it to our brokerage accounts at BMO InvestorLine. Most of it was re-invested there in GICs. Why did I move the money from an investment in Canada Savings Bonds to an investment in GICs? Because after all those years of good returns, the Harper government had finally dropped the rates on CSBs below the rate trust companies offered on GICs.

I think that’s a shame. I think the Canada Savings Bond programs were two of the best, most accessible programs for small investors out there. Through automatic payroll deduction, free to employees and almost free to employers, regular people could be encouraged to save. The savings felt safe. Many people, especially those who moved here from other countries, don’t particularly trust banks. Investing in the government feels safer. The rates used to float a percent or two higher than that of GICs as additional incentive.

And the bonds could be transferred quickly and easily, without redemption, into a no-fee RRSP account called the Canada Retirement Savings Plan administered by the government. The tax receipts came quickly and accurately. Statements came (for free!) in the mail quarterly or semi-annually. Withdrawals (aside from withholding taxes) came with no fees. There were no fees to transfer the funds to another RRSP either. No sales people called, ever. It was a simple, pain free, secure way to save for retirement.

The Federal Government’s War of Attrition on Canada Savings Bonds

Unfortunately, a few elections ago, the government decided it wanted out of the Canada Savings Bond business. Given the tremendous goodwill out there for the bonds, they didn’t want to simply cancel the programs. Instead they began a war of attrition.

First, the interest rates payable on Canada Savings Bonds were slashed. Next, the CSB payroll deduction plan was significantly modified so that it became a virtual electronic savings account. While this had a few advantages it was largely intimidating to people who preferred getting a simple slip of paper telling them what they owned. Next regular CSBs, which could be cashed any time, were cancelled altogether. Only Premium bonds which could only be cashed on the annual anniversary date were offered. The Canada Retirement Savings Plan was closed to new applicants. Then they made another change such that if your balance in the CRSP drops to 0 they will close your account and you can’t re-open it.

That last one is why I left a small balance in each of our accounts. I was quietly hoping for a change in government and a change in policy. It’s not happening though. And I realized if we do get a re-think, they will probably re-open the program to all Canadians. So it’s time to close our accounts for now.

And the best time seems to be exactly now. The interest rate on our remaining premium bonds has dropped below that for a GIC. And ING Direct Tangerine is offering me a bonus to transfer in the money.

Tangerine Offers a RRSP Transfer In Bonus

We already have daily interest savings account RRSPs with Tangerine. They have been very handy for making last minute contributions, printing a tax receipt immediately, and then deciding whether to invest the money in a GIC at Tangerine or transfer it for free elsewhere later when we have time to think.

Their offer says:
“Simply transfer RSP savings you may have to your RSP ISA between August 26 and September 30, 2013. You’ll get a Cash Bonus equal to 1% of the amount you transfer in, up to $100.”

It’s a sign that it’s time for me to make the transfer.

UPDATE: Please be aware that as of January 2015, Tangerine has started charging a fee if you transfer your RRSP or TFSA from Tangerine to another bank, credit union, brokerage or financial institution.

I would no longer transfer money from a RRSP into Tangerine unless I planned to keep it there for the long term.

Goodbye CRSP and Thanks for all the Fish

Today I’ll fill out the T2033 online at ING Direct Tangerine, print a copy and mail it in. My next statement from the Canada Retirement Savings Plan will show a balance of 0. And I will feel sad.

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Did you use the Canada Retirement Savings Plan? Was it simple and useful for you? Please share your reminiscences with a comment.

2 thoughts on “Goodbye Canada Retirement Savings Plan, Hello ING Direct RRSP

  1. I also too feel some emotional attachment to Canada Savings Bonds, but the government is not to blame about the interest rates. The Canada Savings Bond is attached to 1 and 2 year Government of Canada Bonds (the ones that are traded on the market). Because of the major financial crisis and the cut of interest rates, rates have fallen as the Central Bank has flooded the market with dollars and scared investors have piled into bonds. Because of that, savings bonds interest rates have fallen in tandem.

    The reason that the government is moving toward cancelling the program is cost. It costs the government of Canada nearly millions to run the program, and has very little benefit from borrowing the money. That is why many provinces have gotten rid of their savings bond programs (eg. Saskatchewan, BC etc.).

    So while I do have an emotional attachment toward bonds, I do understand why it should be gone. Or what I think could be done is they can change the program to similar to New Zealand’s (lottery bonds) where instead of interest, there is a chance to win prizes instead.

    • Thank you for your informative and realistic reply. You’re right: there are strong financial reasons for the changes that have been made.

      I just wonder, though, if the government couldn’t save a lot of money over the longer-term by encouraging Canadians to save in a program where their savings are not eroded by higher user fees. If, for example, Canadians could save in CSBs for retirement for no fee, that might reduce some of the demand for GIS later. That might make subsidizing the interest rate paid using taxpayer money worthwhile. Maybe not, but I’d like to see an analysis some day.

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