2023-08-24 04:00:00
If you have savings lying around in your bank accounts and/or cash in your RRSP, RRIF, TFSA, mutual fund, brokerage account portfolios, be aware that guaranteed investments like GICs are very generous these days.
Thanks to the sharp increase in the Bank of Canada’s key rate, which rose from 0.25% (March 2022) to 5.0% currently, the various investments guaranteed by deposit insurance offer strong interest yields. tempting.
Since our central bank’s key rate is likely approaching its ceiling, it would be surprising if the return on ultra-conservative investments such as GICs could still climb significantly from the current level.
Among the most generous banking institutions towards savers today are:
– 1-year GIC: Equitable Bank (5.51%); Laurentian Bank and B2B Trust (5.48%); Peoples Trust (5.50%); Tangerines (%); Home Trust Company (5.50%).
– 3-year GIC: Equitable Bank (5.32%); Home Trust Company (5.32%); CDN Western Bank (5.28%); ICICI Bank (5.27%); Laurentian Bank and B2B Trust (5.30%); Versabank (5.28%).
– 5-year GIC: Canadian Tire Bank (5.03%); Equitable Bank (5.05%); CDN Western Bank (5.02%); HomeEquity Bank (5.08%); Laurentian Bank and B2B Trust (4.95%); Manulife Bank (5.00%).
For their part, the major Canadian banks offer returns of the order of:
– CPG 1 an : 5,40%
– CPG 3 ans : 4,80%
– CPG 5 ans : %
The Desjardins and Épargne Placements Québec caisses offer lower returns.
A TIRE IS BETTER….
As the saying goes: “One in the hand is better than two in the woods”. Given the yields offered, now seems like a good time to stock up on guaranteed investments if you are one of the savers with a low level of risk tolerance.
We agree that investing in the stock market and in equity mutual funds or balanced portfolios can bring in considerably more money than freezing your savings in GICs. But you still need to have risk tolerance and not panic or have nightmares when the stock markets record heavy declines.
Fiscally speaking, it is true that interest income is at a disadvantage compared to income from dividends or capital gains. While interest income from guaranteed investments is fully taxable, dividend income from stocks is subject to a lower tax rate and only half of capital gains income is taxable.
But if your investments are in RRSPs or RRIFs, the income from all your investments (regardless of the nature) will accumulate tax-free until the time you make withdrawals, which will be fully taxable according to your level of income.
The only investment vehicle that allows us to avoid tax on all income from our investments is the TFSA (tax-free savings account).
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