April 2014 rate drops to 1.30% | Simplii Financial | Discussion forum

Hi Brian,

Some institutions have done this in the past. I know Questrade had an offer recently to do this for accounts (Questrade is an online brokerage account though - not a bank). The best bet is to check with the institution. Even if they don't advertise it, they might offer it to you.

Before you transfer, check out the transfer fee of the institution to which you are transferring - those fees can eat up your money quickly and some of them charge $100 plus!

Good luck.

JustMe said
BTW, why do you have TFSA at PC Fin when credit unions always pay more?

As for the fee, ask fin. inst. if they are willing to reimburse you. Usually big banks reimburse such fee if you transfer RRSP, but I doubt if such policy is in place for TFSA.

Peoples Trust Bank has been paying the most, not the credit unions, for TFSA savings account, at 3%. Someone else posted that they have been doing this since 2009 when TFSAs were first introduced. They are still doing it today anyway, and for at least a year that I am personally aware of. And they don't charge any transfer-out fees if you want to move it later to another institution (at least as of now they don't charge. I remember when RRSPs were first introduced, and the transfer-out fees just keep going up after the first little while.)

As regards the big banks, they probably would reimburse, but their rates are terrible and they are more likely to charge transfer-out fees when you want to leave later.

CDF (or is it CFD?) has the next best rate to Peoples, at 2.25%, but they have a $50 transfer-out fee too.

Even if you find an institution that has a very good rate and is also willing to pay your fee, it's hard to imagine how you could do better than Peoples Trust, unless you simply don't want to do business with them. While it's true that rates could all go down to .1% tomorrow, it could equally happen to any place you might choose to place your money.

If you have, let's say $32,000 in your TFSA, and you move it to Peoples, you will get almost $650 interest for the remaining 8 months of the year, minus $50 transfer-out fee = about $600. If you leave it where it is, you will get about $280 interest by the end of the year. These calculations assume stable interest rates and monthly compounding. Peoples has been more stable than perhaps any other institution with this product, historically. You can't come anywhere near $600 at any other institution, even if the $50 is refunded.

For the possibility of an extra $320 tax-free dollars, I know what I'd do!

I hadn't thought of that angle about not being able to redeposit the interest. I'm not absolutely sure that it's true, but perhaps you have looked into it. If so, it could get to be a big monkey wrench over time. My understanding was that whatever you took out, you could redeposit, but I could be wrong.

I understand your concern about Peoples. On the other hand, your security there has already been breached and the problem with the credit agency already exists, so it wouldn't make it any worse, I don't think, if you used that bank again. It could be argued that once a bank has been hit in this way, it might be more secure in future than one which has not, as they will be more acutely aware of the problem.

Yes, Loonie is correct. When you make a withdrawal in one year, you can re-contribute that amount in the next year, in addition to depositing your allowable contribution for that year (ie. $5500). There is no limit on this, so if by some miracle, you have $100,000 in your TFSA, you can withdraw it in December of this year, and redeposit it next year with no penalties. If the allowable contribution for next year is $5,500, you could contribute $105,500.

Let me know if this needs more clarification.

And as another point of clarification, as it currently stands, it doesn't have to be re-contributed "next year". The limit is "lifetime". So, save for downpayment for 5 years, then in year 6 take the money out. Year 10 or 20 you have the room equal to the amount withdrawn in year 6 plus the yearly contribution room amounts for years 6 through year 10 or 20.

People like me (old and retired) simply keep adding the $5000 (or as adjusted by inflation) each year. Younger folks with kids in university or still paying down a mortgage may simply be marking time while their contribution room goes up. When school/mortgage payments are done and/or an inheritance is received, large sums of money will suddenly be available for tax free investing.

Think of it, someone 25 years old today, will have in 30 years at the age of 55, somewhere around $242,500 of contribution room using an inflation factor of 2%.

Greg

I found this link yesterday that may help folks struggling with TFSA rules. Likely most helpful will be this link which is to the TFSA worksheet RC-343.

Greg

Thank you, that's great.