Savings bonds are savings securities issued by the Canadian government. The main characteristic of this product lies in the fact that it presents little
- Savings Bonds (SBs); and
- premium bonds (PCs).
Popular for many years, the savings bond has a fixed interest rate at the time of purchase. This has often varied over time but is generally between 0.50 and 0.80%. Likewise, note that you can acquire a savings bond for a minimum amount of 100 dollars.
How do savings bonds work?
Savings bonds have 9 main characteristics:
- purchase of a savings bond possible for a minimum amount of 100 dollars.
- no fees when purchasing the savings bond.
- the duration of a savings bond is 3 years
- the savings bond interest rate is usually set at the time of purchase.
- the bond’s interest rate cannot decrease over time. However, conversely, it may very well increase.
- it is possible to hold savings bonds in certain registered accounts such as an RRSP, TFSA, or RRIF.
- the employer can act as an intermediary between the acquirer and the Canadian government if it offers a payroll savings program.
- Canada Premium Bonds (OPCs) can be redeemed at any time. However, it should be noted that only accrued interest up to the anniversary date of the issue may be affected.
- Canada Savings Bonds (CSBs) offer a lower interest rate than Canada Premium Bonds (OPCs).
Canada Savings Bond: Rates and Yield
Generally, interest rates on Quebec savings bonds are between 0.50% and 0.80%.
There are 2 types of interest when buying Quebec savings bonds: regular interest bonds and compound interest bonds. The former allows you to lay down your interest every year, on the anniversary date of your bond. The latter, for their part, are directly reinvested every year:
- regular interest: annual payment of the savings bond
- compound interest: compound interest allows you to earn higher interest each period without increasing the capital invested. Use our compound interest calculator to do the math quickly.
Why opt for a savings bond?
Benefiting from savings bonds offers you several advantages:
- low-risk savings.
- an eligible investment in your registered accounts such as your TFSA or RRSP.
- a guaranteed interest rate on the date of purchase.
- the savings bond is redeemable without penalty and at any time.
- no management or administration fees.
- savings offering tax advantages: the interest is tax-sheltered and you can benefit from a tax deduction.
Who is Canada Savings Bonds for?
Savings Bonds are available to all residents of Canada. There is no distinction linked to the profession, age, or area of residence.
Where to buy Canada Savings Bonds?
Canada Premium Bonds (OPCs) can be purchased in different ways:
- within credit unions.
- with banks and financial institutions.
- in investment companies.
- a contacting Canada Savings Bonds.
As for Canada Savings Bonds, you can buy them directly from your employer. However, it must offer you a payroll savings program.
When to buy Canada Savings Bonds?
You can buy Canada Savings Bonds at any time. Ideally, you should acquire them as soon as possible in order to take advantage of their performance.
How to buy Canada Savings Bonds?
You need to follow certain steps if you want to buy Canada Savings Bonds:
- choose the amount of your investment: as specified above, the minimum amount under the savings bond is 100 dollars.
- Choose between Canada Savings Bonds (CSBs) and Canada Premium Bonds (CPBs): even though they share common characteristics, CSBs and CSBs are not completely identical. The main difference concerns collection. In the context of mutual funds, you can only receive interest accrued up to the anniversary date of the establishment of the obligation. Regarding CSBs, you only receive interest accrued up to the date of your collection. The Canada Savings Bond, therefore, offers more withdrawal flexibility than Canada Premium Bonds.
- choose how and where to buy your bonds: Mutual funds and CSBs are not bought in the same way. You must therefore inform yourself properly in order to think about buying your Canada Savings Bonds.
Cashing in Canada Savings Bond: how to do it?
You can redeem your Canada Savings Bond funds online, anytime. To do this, it is essential to follow the following steps:
- opening a session on the “OEC Online Services” site.
- navigation in the “Collection” section.
- choice of the plan from which you wish to make a collection.
- choice of the amount to be collected. The minimum amount is $100.
- confirmation of the collection request.
Likewise, you need to know how to cash in a savings bond. If you wish to cash in savings bonds from a financial institution, you will need to bring your certificate and identification. Funds can be obtained in cash or deposited into your bank account.
To redeem your savings bonds from a payroll savings program, you will need to access your online account on the Canada Savings Bonds website. You can also call 1-877-899-3599 for more information.
How to redeem your Canada Savings Bond?
If you lose or have your Canada Savings Bond certificate stolen, you must report it to take advantage of a cashout or to retain your ownership. Here again, it is necessary to follow several steps:
- contact the dedicated service: in the event of loss or theft of your CSBs or OPCs, you must contact the Canada Savings Bonds Program’s customer service department. Note that you must send several pieces of information: your customer number, your address, the number of your certificates as well as the name of the owner appearing on your certificate. Be careful, if you do not provide all this information, your request may be canceled or delayed.
- complete the surety bond: the 2 nd step is to complete the surety bond sent by the Canada Savings Bond Office. You must explain the circumstances of the loss or theft of your bonds and indicate the total value of these. If your bonds have not matured, then you will need to decide whether you want to keep them or cash them in.
- sign the guarantee deed: you will then have to have the guarantee deed signed by all the owners of the certificate of your obligations, all the legal representatives of these owners as well as the parents if the owner is not of age. Note that if your savings bonds bear interest in excess of $3,500, you will need to authenticate the signature by a commissioner or notary public (lawyer, clerk, mayor, or justice of the peace).
- pay bond fees: the total amount of bond fees depends on the value of your bonds. For a certificate with a value between 100 and 1,000 dollars, you will have to pay the sum of 25 dollars. 65 dollars for a value between 1,001 and 3,500 dollars and 2% of the total value for bonds amounting to 3,501 and 100,000 dollars.
- send the deed of guarantee: after having followed the previous steps, it will be necessary to send the deed of guarantee by post.
Be aware that if you find your Canada Savings Bond you must notify the dedicated program.
Canada Savings Bond online: what services?
You have the possibility to take advantage of several OEC online services.
Indeed, you can collect your funds, update your banking information, inform you about your balance and the activity of your plans, or view or print your statement. Of course, it is essential to create a completely secure password in order to protect yourself in the best possible way.