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Email this11:11 am
December 20, 2016
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I found the following Financial Post article, published in August 2014, informative with a few points I was unaware of
Here are the 10 most misunderstood things about TFSAs
Sharing the link in case it might be of interest to others.
Stephen
3:49 pm
November 29, 2017
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Thanks for the link.
I don't know why they didn't call it a TFIA (investment instead of savings). I get that the government is trying to encourage people to save. But if it's possible to incur losses -- i.e. your $5,500 contribution for 2017 could be worth $6000 today or $5000 -- then it's really not a savings account. It's an investment account that could be used for savings (though this doesn't make as nice an acronym).
I don't think the following are misunderstandings, but just some factoids that some people may not know (I'm not talking about the hard core people on this board who know this in their sleep):
- You don't have to have your TFSAs at one institution. You can have them in 2...5...10.
- If you register for CRA's "MyAccount" (they send you a password via Canada Post about 2-3 weeks after you sign-up), you can check your TFSA contributions, withdrawals, etc. Keep in mind this info isn't updated regularly. But it's helpful to see if there's a discrepancy between what your records say and what an FI is reporting.
- The "park your next year's TFSA contribution in November and we'll double the interest to cover the taxes" is usually a really bad deal -- because moving your money out the following year will likely incur a transfer-out fee that more than offsets any savings.
- Speaking of transfer out fees: some FIs will cover the transfer-out costs. Each has its own rules -- for example, some will cover 1 transfer-out fee a year, others don't seem to care how many since they're getting more of your money.
- If you're doing a transfer, make sure that it's not a withdrawal -- i.e. pulling cash out of a registered TFSA high-interest savings account, and then depositing it into a new one at another F1. Have the bank you're transferring the funds to facilitate a transfer of registered funds. That way, the funds simply move from one F1 to another. It has no impact on contribution/withdrawal amounts.
5:17 pm
December 20, 2016
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lostmyusername said
- Moving your money out the following year will likely incur a transfer-out fee that more than offsets any savings. .... some FIs will cover the transfer-out costs.
Interesting feedback LMUN!
I've always wondered how much transfer out fees are intended to cover administrative costs compared with providing a potential disincentive to move the money out of a given institution.
My limited research among some of the higher interest payers of TFSA's showed most to have the highest transfer out fee....up to $100.
Wouldn't it be interesting for this Forum to have a table or chart indicating the transfer out fees of the various institutions many of us deal with, which are often out of the mainstream. An interesting addendum to this would be to include which one(s) currently repay transfer fees from the outgoing institution.
As I look around for a prospective institution for my next TFSA deposit, and in the case of upcoming maturing GIC's in January, the second place I search on their website, after Rates, is the Fees.
So far, Hubert is at the top of my list as the likely recipient of my January transfers and deposit, considering interest rate and absence of potential fees.
8:41 pm
November 29, 2017
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Hello there Nehpets,
Like you, I've seen transfer-out fees range all over the map. I think the lowest I've seen is $40, and the highest around $100. Like a lot of bank fees, this seems arbitrary, and I'm guessing it's more based on historical levels (combined with "hey, we seem to be getting away with charging this so let's keep doing it").
I really like your idea of a list of common fees (although I'm mindful of the fact that this is a free site and keeping that kind of list would be a lot of work -- I'm not volunteering! 
)
If you're thinking of transferring over your TFSA in Jan to another F1, and if there's a transfer-out fee (to my knowledge, the only F1 that doesn't charge for this is People's Trust), then I'd suggest you simply ask the new F1 to cover the fee. I've done this a few times and they've agreed. After all, they're getting new money (the funds coming in, plus the possibility of you making your 2018 contribution as well).
I try not to get too annoyed with tacky F1 fees, but I admit that the transfer out fee in particular strikes me as entirely punitive -- like getting the finger on the way out. It doesn't cost $40 to tell a computer to tell another computer to do something. It doesn't cost $4.
11:02 pm
October 21, 2013
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As soon as you say the fee isn't justified, someone on this site, likely someone whose sons work at BigFive bank and who holds BigFive bank stocks, is going to tell you that it's a very time-consuming process to transfer TFSAs, and therefore a fee is justified. At that point, I will say that it ought to be a cost of doing business, not a penalty to the account holder, and that no fee is justified.
There now, we've got two posts into one!
I agree that Hubert is one of the best places to put your January contributions, at least for the short term, and maybe longer - depending.
5:33 am
November 29, 2017
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LOL -- That's a good one.
I don't own any big 5 big five bank stocks (or small 5 bank stocks for that matter), but I don't have a problem with banks making money for themselves and their shareholders.
But the transfer-out fee is just so...antithetical to the whole "we want to optimize customer experience" song that all F1s sing over and over -- because a lot of people have no idea that this fee exists. And when they find out about it, because it's small relative to their overall transfer, and especially because it's a 100% done deal and there's no way to get it reduced or eliminated -- they just eat it...
It reminds me of the old 'system access fee' that Bell and Rogers used to charge, before they were forced by the CRTC to stop. Maybe in 10 years or so when the public finally sees that they're getting hosed by these nebulous, arbitrary and totally unjustified transfer out fees, then they'll stop.
5:51 am
December 17, 2016
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lostmyusername said
It doesn't cost $40 to tell a computer to tell another computer to do something. It doesn't cost $4.
Seeing as how you seem to be in the know, maybe you can provide a link showing us what the actual costs are for individual services provided by financial institutions, NOT what they charge BUT what it actually costs them.
5:53 am
December 20, 2016
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lostmyusername said
(to my knowledge, the only F1 that doesn't charge for this is People's Trust),
Another is Hubert that has no exit fee (for now), so my upcoming transfer would be from Peoples to Hubert.
Speaking of fees, for anyone dealing with a number of credit unions, it pays to be vigilant with regard to CU's periodic charge for inactive accounts, particularly for folks like us who move money around to chase interest rates, and might leave a deposit account with a minimal balance for an extended period of time.
Stephen
6:23 am
October 27, 2013
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Loonie said
As soon as you say the fee isn't justified, someone on this site, likely someone whose sons work at BigFive bank and who holds BigFive bank stocks, is going to tell you that it's a very time-consuming process to transfer TFSAs, and therefore a fee is justified. At that point, I will say that it ought to be a cost of doing business, not a penalty to the account holder, and that no fee is justified.
There now, we've got two posts into one!
Thank you for the discussion.
FWIW, I see nothing wrong with transfer out fees. I am more familiar with brokerages than banking, where brokerages have been charging transfer out fees for all the decades I have been investing. In most cases, receiving brokerages will cover the cost. Just the way the system works.
6:36 am
May 24, 2016
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Achieve Financial doesn’t charge for TFSA transfers
6:49 am
December 17, 2016
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.
11:03 am
November 19, 2014
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Misunderstood Things About TSFA's
ohh, the irony... the contraction is apparently misunderstood...
tFSa - Tax Free Savings Account
6:38 pm
April 6, 2013
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lostmyusername said
I try not to get too annoyed with tacky F1 fees, but I admit that the transfer out fee in particular strikes me as entirely punitive -- like getting the finger on the way out. It doesn't cost $40 to tell a computer to tell another computer to do something. It doesn't cost $4.
TFSA and RRSP transfers are not electronic. There is still at least a paper cheque that is sent by mail or courier.
I know because an error was made on one of my RRSP transfers. Both financial institutions were notified of the error. Releasing financial institution put a stop payment on the cheque. For some reason, the receiving institution deposited the cheque anyways and, naturally, it bounced.
Receiving institution then charged my RRSP an NSF cheque fee!
10:01 pm
October 21, 2013
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i too have noticed that it seems to be a manual process to a significant degree, using Canada Post. This is why it takes a minimum of two weeks.
Curious minds want to know WHY it is a manual process, to the extent of sending quaint cheques in mail sacks.
I speculate that it's either because of legal requirements or antiquated bank practices; perhaps both. Faxes are good enough to transmit a signature and buy a house; this should be no more difficult.
11:01 pm
December 12, 2009
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I agree that it should've been called a Tax-Free Investment Account ("TFIA") or, more simply, a TFA - Tax-Free Account.
So much "lost potential tax savings" by sheltering a bit of interest every year that pays a measly 1-2.5%. 🙁
Cheers,
Doug
11:06 am
September 11, 2013
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Transferring out a registered account is a service provided to a specific client, the costs ought not be borne by other remaining clients, thus are entirely justifiable. Plus, it's true, as a long-time big banks shareholder I'm very happy for the contribution this revenue stream has made to the fortune I've made from those shares over the decades.
As far as people on here with "sons who work at BigFive bank", well, not too clear what aspersions are being cast there - ?? (I do have sons, but none work at banks - and what about daughters?), so not much you can really say about a comment like that.
12:28 pm
January 3, 2009
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Bill said
Transferring out a registered account is a service provided to a specific client, the costs ought not be borne by other remaining clients, thus are entirely justifiable. Plus, it's true, as a long-time big banks shareholder I'm very happy for the contribution this revenue stream has made to the fortune I've made from those shares over the decades.
Bill, your honest answer outlines the truth of what these fees have become. A profit stream. The fees are not just for the service, they are inflated to generate profit and deter people from chasing better returns. People shouldn't be surprised by this, but they should just be aware that these are artificially inflated costs which can be avoided if you pick your institutions more carefully.
1:04 pm
October 27, 2013
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Bill said
As far as people on here with "sons who work at BigFive bank", well, not too clear what aspersions are being cast there - ?? (I do have sons, but none work at banks - and what about daughters?), so not much you can really say about a comment like that.
That was directed at me. I took it as a compliment. I even thanked Loonie for 'the discussion'.
1:58 pm
November 29, 2017
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Bill said
Transferring out a registered account is a service provided to a specific client, the costs ought not be borne by other remaining clients, thus are entirely justifiable. Plus, it's true, as a long-time big banks shareholder I'm very happy for the contribution this revenue stream has made to the fortune I've made from those shares over the decades.
I'm happy that you've made a fortune -- more power to you. But your premise needs adjusting. Banks that cover transfer-out fees aren't passing that burden onto customers (and shareholders) like you. First, the number of customers who negotiate having this fee covered is very small -- I'd safely assume that 90% of customers don't know or don't care. Second, even at $40 it's a cash cow -- let alone $100.
Personally, I've never paid transfer-out fees (and I've never had to be rude or aggressive with an FI about it -- nor would I). I'm sorry if this has put a dent in your fortune.
6:51 pm
October 21, 2013
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I'm glad to see that some of us have retained our sense of humour in this season of ho-ho-ho!
I'm not sure if it pays in the end to keep dinging customers, but, if it does, well, there's one born every minute as the saying goes.
As voodoo says, fortunately we have choices, and the power to negotiate. My total income has gone up substantially since I started cutting ties with the BigBanks, even though I'm fully retired. Next year will be even better as I will be getting rid of one more and significantly reducing another.
Please write your comments in the forum.