Log In
Register
Home
Topic RSS
Facebook
Twitter
Email this8:33 am
December 26, 2020
Offline
I created my Oaken TFSA Savings Account earlier this year. I expected that I would be able to have the annual pay GICs I already owned in the TFSA pay the annual income into my Oaken TFSA Savings Account. I learned today from an Oaken CSR that is not how it works.
My Oaken TFSA GIC that matured July 3 paid both principal and interest into my Oaken TFSA Savings Account. However, the two Oaken TFSA GICs with an anniversary date of July 8 paid the annual income into my non-registered Oaken Savings Account.
The reason given given by the Oaken CSR for doing this transfer from inside my Oaken TFSA to outside my Oaken TFSA was the July 8 income from the 2 TFSA GICs that were not maturing in 2024 would be considered a new contribution to my TFSA. It took 2 days to get this answer. The CSR could not provide anything in writing. This is what the "back room" said.
I conclude from this rule Oaken has that the only way to use the TFSA Savings Account where I could possibly reinvest all the proceeds from all the GICs is to have only 1 Year GICs or compound interest GICs.
I generally chose annual pay GICs in case I need the cash income. I generally chose multi-year GICs as they normally pay a higher interest rate. I have no contribution room for 2024 so I cannot just contribute these payments to my non-registered Oaken Savings Account back into my Oaken TFSA.
I also have an CIBC Investors EDGE TFSA. There I have preferred shares (no GICs) which either quarterly or monthly pay income to the "Cash basket" inside this TFSA. I reinvest this Cash when I have enough to make a reasonable valued trade ($1,000 roughly). There seems to be no rule at CIBCIE that the ongoing income is a new contribution.
I told the Oaken CSR that I believed Oaken was wrong in their interpretation of the TFSA rules around contributions and GIC income. It seems crazy to me that income earned in one area of a TFSA could not be transfered to another area of the TFSA. The purpose of a TFSA is to build wealth by saving and earning tax free income
Do any readers have experience with other financial institutions in regards to TFSA annual income paying GICs? Is Oaken wrong? Do other banks do it differently? Or is what Oaken says correct?
9:32 am
September 30, 2017
Offline
After reading your post, I decided not to open an Oaken TFSA Savings Account just yet. I assume all the Oaken TFSA(s) you mentioned are under the same (either Trust or Bank), meaning the interest is not cross paying from one to another.
9:47 am
October 27, 2013
Offline
Banks appear to have complicated ways of handing multiple investments and especially in registered accounts. Different account numbers for GICs, HISAs, etc. rather than having them all under one umbrella with one account number. It does not surprise me Oaken really has their head up a dark place.
I would never, ever touch a bank or CU for any registered accounts. I would only use a discount brokerage where everything is neat and tidy under one account number and one can have any number of GICs from multiple issuers, multiple MMFs from multiple issuers and in a few rare cases, multiple ISAs from multiple issuers.
10:13 am
August 4, 2010
Offline
I doubt there is any CRA/TFSA interpretation causing this. It sounds like the Oaken systems are in effect "deregistering" the cash payout from the annual GIC before putting it somewhere else, in this case a TFSA savings account. Their GIC purchase process asks the question "Interest Maturity instruction" when you select Annual (but not Annual compound), and if you choose "Savings Account", it shows your Oaken savings account, but not any Oaken TFSA savings account. So their systems don't implement any destination that keeps the interest TFSA-registered.
But there is no reason they couldn't - at worst with mixed Home/Trust on the GIC and savings account, or even just different reg# in the same entity, they should be able to do in effect something similar to the TFSA transfer process internally and keep the money registered. But they may not have gone to the trouble to implement that, so those who actually want annual cash but inside the TFSA umbrella are out of luck.
As mentioned, compounding GICs don't have this problem. In the application, the question changes to "Principal maturity instruction", and you can choose your TFSA savings account to received the matured total. For whatever reason, they just haven't implemented this pathway for annual cash interest payments. But there is nothing that would prevent them from doing that.
10:34 am
April 6, 2013
Offline
Sounds like Oaken has organized the TFSA savings account to be a separate TFSA trust instead of being part of the TFSA trust for the GIC's. There is a different declaration of trust for their TFSA savings account:
Oaken seems to be willing to do a direct transfer of the principal and compounded interest of a GIC at maturity to the savings account TFSA. But, Oaken doesn't seem willing to do the same for non-compounding interest paid out annually.
Explanation from Oaken CSR is garbage. Distributions from investments held in a TFSA trust are not considered to be new contributions to the trust. The issue is the Oaken GIC accounts can't handle cash.
Brokerage TFSA accounts don't have an issue because a brokerage account can hold shares, mutual fund units, GIC's, bonds, and cash.
11:22 am
August 4, 2010
Offline
Also, paying the TFSA annual interest out to a non-registered destination will be a TFSA withdrawal, and the extra room created by the interest won't be available to reuse until Jan 1, like all withdrawals.
Since the "instructions" question just changes its label (and choices) between the annual and compound options, instead of the annual having two separate choices for annual interest and maturity instructions, my guess is that it would have taken some work to provide the UI and implement the payment pathway for TFSA savings on the annual interest payout, and they just didn't bother.
If you call up a GIC, you can set maturity instructions for it. For my compound ones, there are independent choices for what to do with the original principal amount, and for the compounded interest portion, and you can specify TFSA savings as a destination for either. I don't know if it looks the same for an annual pay, but in theory they could have the annual interest go to the same destination set for the maturity interest, but I suspect their annual pay interest logic won't look at that setting.
At least some of Oaken's tech stack seems to be done by the same people (some Concentra IT group?) as Hubert's new Access-flavoured site, which people here know and love so much!
12:55 pm
November 18, 2017
Offline
Bizarre. I have only a compounding GIC with Oaken. It does pay into the same term, as a GIC value increase. As far as I can tell, other institutions allow payouts to the cash portion of a TFSA. I just checked with Peoples and was transferred to a "term investment specialist" who assured me interest would be paid into a TFSA cash account and there would be no de-registering.
Could the problem with Oaken be that they had no TFSA cash accounts until recently?
RetirEd
1:07 pm
January 12, 2019
Offline
.
Whew ❗❗
I came this close [➡ ⬅] to almost setting up a TFSA with them. 
For the most part, I like Oaken ... but that Ain't gonna happen now.
Thanks for the Heads-Up.
- Dean
" Live Long, Healthy ... And Prosper! "
2:18 pm
August 4, 2010
Offline
This isn't a problem unless you want registered annual pay GICs, with the money staying registered instead of going to a non-registered destination. If you choose the compounded interest, you can have that go to a matching registered savings account at the end of the term. I would think that wanting the interest of registered GICs (even TFSA) as liquid registered cash is probably a minority need, likely why they did go to the effort of implementing it.
2:43 pm
October 27, 2013
Offline
Multi-year GICs with Annual Pay are most suited for those drawing on the annual interest income for cash flow needs so from that POV, it makes sense for that interest to leave the TFSA. That said, the FI shouldn't be making that default assumption.
My elderly mother had the bulk of her assets in a GIC ladder of Annual Pay 5 year GICs. That made perfect sense... registered or not.
3:28 pm
December 26, 2020
Offline
Thank you for the comments above. No one has said anything about how their financial institution (Bank) TFSA handles annual pay GICs so if there are more comments they would be appreciated.
My Oaken TFSA is all in Home Bank (HB). After I created the TFSA hisa I called Oaken twice to direct the annually paid interest to my TFSA hisa. I was not told that my instruction applied solely to the annual interest paid at maturity.
I like Oaken. I have been a client since 2014. I opened my HB TFSA in 2019 after I closed my RBC Dominion Securities TFSA (selling all investments and withdrawing the cash) at the end of 2018. With Oaken, I realized from the start there was no place to park the annual interest income but I decided to work with what was offered. I do not believe Oaken states anywhere what leadtime is required to change maturity instructions. I have missed opportunities to renew GICs at maturity in my TFSA because I called too late and the GIC was already being processed for payment to my non-registered HB hisa. For this reason I decided to create a CIBC Investor's Edge TFSA in 2021. From the start I saw the advantage because there is a place for any cash inside the TFSA.
Thanks AltaRed for the comments about non-bank registered accounts. I agree it is simpler. In addition if I want the cash I can sell the investments and make the withdrawal.
Thanks Norman1 for the Terms and Conditions and the comments. Every financial institution I deal with has good things and things they could do better.
Thanks NorthernRaven for your discussion about compounding GIC and other comments.
This is what I decided to do this afternoon after wasting a week since the July 3 maturity of the GIC:
I like Oaken's 2 year GIC rate (5.05%). It beats the highest rate offered by CIBCIE for 2 years which is 4.70% (Versa Bank or Fairstone Bank) today. So today I invested all the cash in my HB TFSA hisa in a 2 year compounding GIC. I read the 3 pages of terms and conditions before closing the deal online.
The longest maturity in my HB TFSA is 2027. If I am unsatisfied with how this goes I may not have a HB TFSA at the end of 2027 but I will give it a try.
5:56 pm
August 4, 2010
Offline
Not all institutions may have both annual pay and compounding options - I don't think any of Hubert's GICs have annual pay options, for instance, and the choice doesn't come up with EQ's interface that I see, they compound. Tangerine does seem to, but I didn't follow the UI far enough to check on payout destinations.
Personally, I've never used annual pay, but especially in a registered account I'd likely avoid them and make other arrangements for liquid cash. Incidentally, Hubert's 1-year quarterly cashable can be useful for liquidity - buy multiple small chunks of this and you can cash in one of them in unexpected circumstances, but lock in 1-year rates otherwise.
5:57 pm
October 21, 2013
Offline
TFSAs exist for the SOLE PURPOSE of sheltering income from taxation. If income is being paid to a non-registered account, the TFSA account has been rendered useless.
The CSR and apparently also the back room folks don't know what they are talking about. Unfortunately, this is not unusual with Oaken employees. The last time I bought a GIC there IN PERSON was from a guy who didn't seem to know enough to wear a clean unwrinkled shirt. He was also incompetent, and made five separate errors before we were done. I had to point out the errors to him. He said he was in Canada on some kind of work permit., from Ireland.
I don't deal with Oaken now.
You need to speak to a manager to get this fixed. If that doesn't work, you will have to put in a complaint to the bank's ombudsman.
It sounds like Oaken did not post the interest to the TFSA before sending it to non-reg'd account. If so, then it won't affect contribution room as it was never in TFSA. You just need to get them to deposit the interest to the correct account. ASAP. This is something Oaken must do; you cannot do it yourself, as that would be an over-contribution.
It sounds to me like this was an error in IT department. I would never assume a brokerage is immune from errors.
6:18 pm
August 4, 2010
Offline
It is quite possible this can't be done with Oaken's systems. Before they had registered savings accounts, matured GICs would either reinvest at maturity, or pay out to some non-registered destination, unless you had a transfer-out request there and waiting for it.
With the new registered accounts, they've updated the maturity pathways to be able to dump the funds in there, but they didn't bother to make this available to the annual interest pathway( in years prior to maturity). There's likely no solution except for them to someday do the IT and other backend work to make this possible - a manager can't help.
7:43 am
December 26, 2020
Offline
Thanks for the additional comments.
Loonie, I appreciate the support but I am not going to argue the issue any more with Oaken. I believe it is, as NorthernRaven describes, the way Oaken has programmed it. I hoped it was different than this but it is not. I have taken the payments transferred to my non-registered HB hisa out of Oaken and will contribute them to my CIBCIE TFSA in 2025.
NorthernRaven said; "Not all institutions may have both annual pay and compounding options.".
I only have one compounding GIC which was created yesterday in my HB TFSA. I have all annual pay GICs with Access(Hubert (?) now), EQ Bank, Motive, Peoples Group, Wealth One, Tangerine, Laurentian Bank and Oaken. In my CIBCIE RRSP and LIF I have some GICs and they are all annual pay from many different issuers. It is my preference and is likely not optimal and also creates more work for me, but I like to get paid.
8:04 am
April 6, 2013
Offline
Oaken seems to have done something squirrelly to have annual pay interest for TFSA GIC's.
Under their table of registered GIC rates, there is this limitation:
… For all registered plans, interest is compounded annually and paid at maturity. Interest is calculated per annum. Annual interest is available for TFSA plans only. …
Issue won't occur with RRSP GIC's. Those can only have the interest compounded until maturity and not leave the RRSP GIC annually.
5:58 pm
November 18, 2017
Offline
A reminder on this conversation: annual-pay GICs have the advantage that the payouts earn the full-term interest rate even though their amounts are locked in for a shorter period.
They also allow one to stuff more cash into a term without exceeding insurance limits, as the earned interest does not increase the amount on deposit - you can move it elsewhere. (If it's in a TFSA, make sure there are no transfer-out fees or do it in December. The latter is iffy because of common transfer delays...)
RetirEd
9:14 pm
October 21, 2013
Offline
I imagine the issue at Oaken IT is that they failed to update their procedures when Oaken introduced the TFSA savings accounts. Thus, the computers are not programmed to deposit interest earned in TFSA GIC into TFSA savings account.
Eventually, they are going to have to figure this out. They may not be aware of the issue until someone complains at a higher level.
I respect OP's decision not to proceed further with this complaint as that process can be a royal pain, but it's really too bad to lose the tax free status of a year's interest that should be in TFSA - plus all the compounding on that interest and contribution room that it would create for the rest of your life if you chose to withdraw it. Sooner or later someone will force them to update.
(Of course, a normal well-run bank would have had TFSA savings accounts from Day One and would not have to be backtracking like this...)
8:29 am
April 6, 2013
Offline
The annual GIC interest is likely paid to the GIC TFSA and withdrawn to the non-registered Oaken savings account. So, no loss of the tax-free benefit on the annual interest.
RAV4guy will know for sure next year if a T5 slip is issued or not and whether or not the annual interest paid is eventually added his TFSA contribution room.
12:05 pm
October 21, 2013
Offline
Norman1 said
The annual GIC interest is likely paid to the GIC TFSA and withdrawn to the non-registered Oaken savings account. So, no loss of the tax-free benefit on the annual interest.RAV4guy will know for sure next year if a T5 slip is issued or not and whether or not the annual interest paid is eventually added his TFSA contribution room.
Maybe, but that's not the way OP reported it initially, so we can't assume the interest went first to the TFSA. If it did, and since it was only a few days ago, Oaken ought to be able to reverse it, although that's not what OP wants. It would however preserve the contribution room etc..
I never did online banking at Oaken. Do they not have a transactions list where one can track this interest? Deposits to the non-reg'd savings account would likely show source, especially as it's internal.
Please write your comments in the forum.