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Email this6:15 am
February 20, 2018
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Found out theres a clawback on the 4/4 so if u elect to receive annual interest payments and cash it before the term is up theyll clawback to 1.25 from ur principal. And u will have paid tax on each 4% year till the day of cash, no refund from the taxman right like a mutual fund that loses value uve already paid tax.
Still not a bad deal id probably do it if i was closer.
8:40 am
November 7, 2014
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hotmony said
In the unlikely event they go bust before a gic matures do investors get 4% up till dico moves in or 1.25 the cashable rate before maturity
I would logically guess, and this is just a guess, that if Ganaraska defaulted due to insolvency, DICO would pay the GIC owner the 4% to that point. The 1.25% claw back rate only applies if the GIC owner cashes the GIC prior to maturity. The contract is for the credit union to pay the 4% until maturity. Insolvency would just cause the "maturity date" to occur prematurely.
3:31 pm
October 21, 2013
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I think it's best not to think of this as a redeemable GIC. You'd have to be absolutely desperate to cash in a 4% GIC anyway.
6:40 am
September 29, 2018
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There's no need to by a single, large cashable GIC. Buy them in chunks of $10k or $25k. There is no cost.
The other thing to keep in mind with Ganaraska, is that if you want the interest paid annually then you have to open a savings account -- because that's where the money goes. There is a monthly fee for this -- $3 or $4 I think.
And also, as it has been mentioned -- and I can confirm because I specifically asked about it as well -- if you do cash out early, you'll get the 1.25% redemption rate retroactive to when the GIC was opened, and the taxable interest wont be adjusted.
For example, on a $100k GIC you will pay tax on $4,000 in interest after 1 year. You will be issued a T5 for $4000 and pay tax on that amount. Let's say on day 366 you want to cash it out. $2750 in interest for year 1 will be widthdrawn from the value of the GIC, and so you will get $101,250. But you will not get another T5. You will still have to pay tax on $2750 in interest income that you effectively never received. If you are in a 40% tax bracket, then that is $1100 down the drain.
So basically, if you cross the 1-year mark the effective early redemption rate is lower than 1.25%. All the more reason to break up your deposits into smaller amounts, so that if you do need to cash out then the hit will be minimal.
6:48 am
December 17, 2016
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You ONLY pay taxes on monies earned (immediate or deferred) you DON'T pay taxes on phantom money - a covering letter to CRA will take care of that discrepancy.
6:54 am
September 29, 2018
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TopItUp -- OK you seem to be certain about this and that's good. I'd prefer to believe you on this.
But I specifically asked Ganaraska about this when I was in the branch, and the manager called her boss who said that a T5 wouldn't be reissued in such a case.
Maybe they just made it up. Saying "I don't know" seems to be a lost art these days.
7:02 am
December 17, 2016
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Well yeah depending on when you withdrew the funds you may in fact have to pay the tax on the $4,000 interest and then file an amended return after you've collapsed the GIC. But collapsing the GIC at anytime prior to you actually filing your income tax return for the T5 period can be covered off with a letter and likely a copy of the bank statement showing the collapsing and actual monies paid out.
7:10 am
September 29, 2018
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Yes, filing an amended return is what I thought as well, and I was surprised when Ganaraska said that's not how it works (to which I replied that they should transparently tell people that cashing out early will effectively result in less than 1.25%....that conversation didn't last very long).
1:18 pm
October 21, 2013
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DUCA also offers cashable GICs. Most are cashable after one year. Anyone know how their system works? Both DUCA and Ganaraska are Ontario CUs.
2:05 pm
October 17, 2018
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Duca has some FLEX GICs . The longer term ones are usually cashable after 24 months and the shorter ones are cashable after 12 months . They deduct 1% from the rate you bought it at and pay you based on that. So a 10k 3 year at 3% would be a 2% if redeemed between 12 to 36 months.
1:03 pm
January 30, 2009
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I'm curious to get opinions on this offer (and yes I realize all they will be is opinions). This will all be speculation but I am having a bit of a tough time deciding on whether to take it based on the current climate of increasing rates. I like the fact that it is cashable early (with penalty) and can be paid out yearly. I know experts were also predicting 3 rate increases next year (2019). Of course this doesn't necessarily mean that there will be equivalent GIC rate increases.
I find it interesting that the short term (90 days to 1 year) are on par in some cases with the 5 year GIC rates (except this one which leads the market on 4 year rates). I have tried to do some analysis based on historical rate increases in GICs when BOC increases the rate vs. the amount loss by not taking this offer.
I'm also hoping to make some ETF purchases but plan to wait until there is a discount which I think is coming (again speculation). If there is a crash, perhaps it would be better to save funds for this instead.
I know that some of you are very good at mathematical reasoning and statistical analysis. What are your thoughts?
2:24 pm
November 7, 2014
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Hi James:
First of all, none of us knows with any degree of certainty if rates will increase and how quickly. As I have said somewhere else on this site, we are always just a crisis or two away from a trend reversal. The latest oil price fluctuations and trade disputes have illustrated this very well.
As a GIC investor, I have always looked for the best rate available when I had money available. I guess I am fortunate enough to have a few laddered investments maturing throughout each year. If you do not need the principal amount for a given length of time, invest it at the best available rate, with a reputable insured institution. If there is doubt as to when some of it may be needed, break it up into smaller portions, as others on this site have suggested, and cash out small amounts with the penalty.
I have reasons for not risking my savings in the stock market. The risk is not worth the aggravation to me and my family. Some "experts" say we are in for a major stock price correction. Some have been warning us of this for years as stock prices have continued to rise. There is a general feeling that stocks are over valued.
I come from a very conservative investment background and am retired with a nice nest egg. I plan to retain it and benefit from its income. I do know people who have invested in stocks and now are concerned because the value of their nest eggs have decreased. Everyone has their own circumstance and risk tolerance level to deal with.
Good luck with your choice. FYI: I have deal with Ganaraska and have been happy with their service.
2:58 pm
January 30, 2009
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Thanks gicjunkie! I appreciate your reply and insightful input. I also appreciate your contributions to this forum and your sharing of GIC rates and specials you've found.
5:57 pm
November 7, 2014
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James said
Thanks gicjunkie! I appreciate your reply and insightful input. I also appreciate your contributions to this forum and your sharing of GIC rates and specials you've found.
You're welcome.
9:29 pm
April 6, 2013
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thisusernameforlease said
Yes, filing an amended return is what I thought as well, and I was surprised when Ganaraska said that's not how it works (to which I replied that they should transparently tell people that cashing out early will effectively result in less than 1.25%....that conversation didn't last very long).
Ganaraska was correct.
No amended T5 slips. No amended tax returns. Just a deduction under Income Tax Act subsection 20(21) for the clawed back interest in the year it was clawed back. Details in new topic Tax treatment of GIC interest penalties.
12:13 pm
September 29, 2018
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Er, no -- Ganaraska wasn't correct.
They said there would be no adjustment whatsoever through an amended T5 or any other means. They didn't say "we don't know" or "ask the CRA." They answered my question definitively.
Glad to hear they were wrong.
6:37 am
October 21, 2013
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If you are taking the compound interest option and do not have a savings account there and do not come and pick up the money or arrange to have it transferred, it will automatically renew at the prevailing rate into another cashable GIC. Because it's cashable, you can still make arrangements to get your money after the maturity date, but you wouldn't get any interest after that - assuming you don't leave it there another year. I asked, and this is what I was told. It seems that cashability is the norm at Ganaraska.
You might be wise to plan ahead so that the date of maturity is not on a stat holiday or weekend. I don't know if they would give you your money a day or two early in this situation or not. They are not open Saturdays. Something to think about.
5:41 pm
September 5, 2013
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For the existing members, we just recieved the dividend on Jan 15, 2019 of $1.25 for $50 membership, which is at the rate of 2.5%.
12:42 am
October 21, 2013
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Interesting.
Do you have a savings account for them to deposit this into?
If not, do they send a cheque? (Seems silly for such a small amount, but am wondering how they manage this.)
2:28 pm
November 21, 2015
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Yes - savings account. They open as many accounts as one wants. For their cashable GIC, I use it as a strategy - should the need arise to cash out, then only one part get colapsed. Identical terms, just the principal is initially split e.g. six-way.
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