Created on Friday, 26 November 2010 10:40
Last Updated on Friday, 13 February 2015 12:57
Written by Glenn Szlagowski - Financial Adviser
How to transfer a RRSP
Many Canadians aren't aware that RRSPs can be transferred from one financial institution to another in order to get a better interest rate. And that the RRSP transfer process can be repeated as many times as you like.
By law, RRSPs are portable and transportable - even locked-in RRSPs.
Don't like the paltry interest rate offered to you by your bank? Find a GIC deposit broker and just transfer it out!
One of the most popular myths in Canadian financial circles is that all banks have the same interest rates but fortunately, this myth is mostly untrue. It is true that the BIG FIVE Banks (Royal Bank, TD-Canada Trust, CIBC, Bank of Nova Scotia & Bank of Montreal) often have remarkably the same interest rates but unknown to most Canadians, there are dozens and dozens of other banking institutions competing for your dollar.
The truth is there is real competition for your business and interest rates are almost always much higher than the BIG FIVE banks.
With the help of a GIC deposit broker we can help you locate a bank, trust company or credit union and obtain a higher interest rate on your savings accounts and GICs.
How much commission do you have to pay for this service?
Asset management fees?
Any other fees?
Deposit brokers are paid by the banks not by you, so you pay no fees, no commissions or hidden costs.
The RRSP transfer process explained
Suppose you have an RRSP at Bank ABC. The deposit broker alerts you that another bank - Bank XYZ, is currently paying much higher interest rates.
The deposit broker prepares a transfer form for you to sign along with a RRSP application with Bank XYZ. The transfer form is a written request to your bank to transfer your RRSP to Bank XYZ and the RRSP application tells Bank XYZ how to invest your RRSP money when they receive it from your Bank ABC.
Bank ABC receives your RRSP transfer request and sends the proceeds to the Bank XYZ. The deposit broker prepares all the required paperwork and tracks and monitors the transfer process and follows up with the relinquishing bank if they are tardy in transferring your money.
FAQ (Frequently Asked Questions)
Q. Do I have to pay any taxes when I transfer my RRSP's?
A. No. You are transferring your RRSP from one bank to another. There are no tax consequences to do so because you are only transferring your RRSP, not cashing out your RRSP.
Q. If I am transferring my RRSP to another bank do I have to open up a new bank account?
A. No, Your RRSP is set up at the new bank with the assistance of your deposit broker. You are not required to open up a new savings or chequing account at the new bank. Only your RRSP investment resides there. The deposit broker looks after the paperwork to initiate the transfer and ensures that the transfer is completed properly.
Q. What do I have to sign in order to transfer my RRSP to another bank or other financial institution?
A. Two things. A transfer request and an application to buy a new RRSP. The deposit broker pre-prepares all forms that are required.
Q. I have other investments in my RRSP at my bank. Can I transfer them?
A. Absolutely, The process is the same.
Q. But if I transfer out my RRSP, won't my bank be mad at me?
A. Yes, they will – in a way. Your bank may attempt to call you when they receive your signed request to transfer your RRSP to another banking institution .
First of all, the money is yours and not the banks. Although your bank does not want to lose assets, your number one priority is to grow your own assets, not to protect theirs. Banking institutions do not hesitate to move millions of dollars to another financial institution for a tiny fraction of a point of extra interest – and we should be doing the same. If the bank wants to retain your business then all they have to do is to beat my rate and if they do so (unlikely), I would certainly encourage you to take them up on their offer.
 Should your bank contact you, all you have to say is that you are transferring your money to another institution in order to get a better rate. The bank is obliged under the ITA (Income Tax Act) to transfer your RRSP upon receipt of your written transfer request.
Q. What happens to my money if Belmont Village Financial goes bankrupt?
A. This is a very important point. Nothing happens - your investments are safe because your GIC investments are not located here - your investments are placed directly with the bank, trust company or credit union and you can contact them at any time about your account.
Q. What other protections do I have?
A. All GICs available at Belmont Village Financial have deposit insurance through either a federal crown corporation (CDIC) or a provincial statutory corporation that insures credit unions. Therefore, your GICs are protected against default if the bank, trust company or credit union becomes insolvent.
Q. How do I open an account with Belmont Village Financial?
A. We have a very short, straightforward account application. It is only about 1/2 page for a joint account. Here's what's required: name, address, birthdate, SIN, phone number, occupation, employer's address and 2 pieces of identification (one of them should be a photo ID). Driver's license, birth certificate, passports and other ID can be accepted. You can open an account and purchase a GIC the same day.
Belmont Village Financial is the largest and most experienced GIC deposit broker in the Kitchener-Waterloo and surrounding area. Their GIC deposit brokers are registered with the RDBA (Registered Deposit Brokers Association).
Q. Where can I get a copy of your interest rates so I can compare?
A. Our top rates are posted and updated daily on our web site at www.belmontvillagefinancial.com.
Editor’s note: For the sake of this discussion, transferring registered plans refers to the transfer of a RRSP, TFSA, RRIF, LIRA, LIF, etc within Canada.
Transferring these plans or investments outside the country is a very complex subject involving taxation and is outside the scope of this article.