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TFSA at 3% for long ?
December 19, 2014
10:59 am
Koogie
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Just a warning for those that are thinking of sticking their 2015 TFSA contribution into the Peoples Trust account at 3% in a couple of weeks (like me !)

Members on some other forums are saying they have been told on the phone by PT staff that the rate will be going down to 2.5%

I have not verified this myself but will be keeping an eye on it and probably calling ahead to PT before I make my deposit (or not).

Suggest anyone else do their own due diligence as well.

Cheers.

December 19, 2014
11:04 am
james1900
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2.5% is still attractive.

December 19, 2014
9:56 pm
Rick
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That was a pretty good run overall. I've had mine with them since April 2013 @ 3%. Wish I had discovered them sooner. "Warning" sounds a bit ominous. Thanx for the heads up though. Won't really affect my decision on where to put my 2015 contribution. Nothing on the comparison chart that is 100% liquid and beats 2.5%. Show me something that doesn't lock my funds in and I'll consider it. Otherwise, I'm more than happy with PT....no fees, best rate, fast transfers in/out, good service and friendly, helpful CSRs.

December 19, 2014
10:05 pm
kanaka
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I was planning on reallocating my GICs at maturity to PT. I have a question....compounding on a bank account gives better annual yield vs a GIC?.. So what would 2.5 give you in a year from a savings account vs 2.5 for a GIC. Would the savings account give you 2.7 or 2.8 vs how a GIC is compounded?
I agree not locked in and no penalty to withdraw is good. Lol....but still leery!

December 19, 2014
10:46 pm
Rick
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kanaka said

I was planning on reallocating my GICs at maturity to PT. I have a question....compounding on a bank account gives better annual yield vs a GIC?.. So what would 2.5 give you in a year from a savings account vs 2.5 for a GIC. Would the savings account give you 2.7 or 2.8 vs how a GIC is compounded?

If you start a TFSA in 2015 from scratch with 37000 and put it in a 1 year GIC paying 2.5% at maturity, you'd earn 925.00 in interest. If you put it in a savings account paying compounded monthly interest at a 2.5% annual rate, in a year you'd have about 936 in interest at the end of a year if the rate holds steady throughout the year. That works out to about a 2.528% , or .028% better rate if calculated annually. There is chance that rates will go down, costing you money in the savings account, but there is a chance (long overdue IMHO) that rates could go up, costing you money in the GIC. So you’ve got to ask yourself one question: 'Do I feel lucky?' Well, do ya, punk?

December 20, 2014
8:00 am
JustMe
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Even if rate goes to 2.5%, they will still be better than anybody else. Remember - interest is TAX FREE.
But I doubt you got that info from PT staff as they are not suppose to 'predict' future interest rates with customers - like any other bank. Please provide time/date and name of the client service rep as a proof.

December 20, 2014
8:03 am
NorthernRaven
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Reducing the TFSA rate from 3% to 2.5% (if it happens) would save PT about $1 million/year (they are approaching $200 million in TFSA savings). Presumably they feel they can find more effective ways to spend that money (or not) to acquire new deposits.

You may want to confirm with PT that they intend to continue with the 'no transfer fee" policy - if TFSA accounts are getting numerous enough to reduce the rate, they may also look at offsetting transfer costs, ala Tangerine.

It is probably best to think of something like PT's 3% TFSA rate (or even 2.5% to some extent) as partly a marketing choice. They set it high to attract deposits, and the rate is unlikely to fluctuate with underlying interest rates.

Because of TFSA withdrawal rules, TFSA savings probably behave more like a cashable GIC with a term ending at the end of the current year. People are less likely to move away from a PT TFSA account than a regular HISA, since they can't re-contribute the money into a competitor TFSA until January, and any non-registered alternative they might park in until then would be taxable. So TFSA deposits are fairly "sticky", and probably justify rates similar to what they are willing to give on 1-year non-registered GICs, rather than HISA.

December 20, 2014
8:52 am
Loonie
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NorthernRaven said

Because of TFSA withdrawal rules, TFSA savings probably behave more like a cashable GIC with a term ending at the end of the current year. People are less likely to move away from a PT TFSA account than a regular HISA, since they can't re-contribute the money into a competitor TFSA until January, and any non-registered alternative they might park in until then would be taxable. So TFSA deposits are fairly "sticky", and probably justify rates similar to what they are willing to give on 1-year non-registered GICs, rather than HISA.

You can do a direct transfer of TFSA though, at any time of year.

I think most of us appreciate the heads-up even if it isn't yet verified. Other rumours about such things have proven correct.

It makes sense that they might do this, as there is no real competition left at the 3% mark. I believe, but am not sure, that it was SD2013 who said some time ago that they would likely pull their rates back when they'd met their target deposits. With January coming, they would be expecting a ot of deposits and that could easily put them over the top.

They know we don't have a lot of choices.

December 20, 2014
10:46 am
kanaka
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JustMe said

Even if rate goes to 2.5%, they will still be better than anybody else. Remember - interest is TAX FREE.
But I doubt you got that info from PT staff as they are not suppose to 'predict' future interest rates with customers - like any other bank. Please provide time/date and name of the client service rep as a proof.

But a 3.05% GIC is tax free too. Just not liquid.

December 20, 2014
10:59 am
kanaka
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All of the speculations sound good.
BUT
As mentioned not official and possibly misquoted here.
Speculation is...rates to increase next year, why drop them?
Lots will reallocate all or some at a higher rate GIC
If there is a rate decrease I would imagine they would announce first of January and as mentioned here to also implement a transfer fee so some would have to use option 2 to transfer out at the end of 2015.
That move could have an over all negative impact on their customer base.

December 20, 2014
2:52 pm
Loonie
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They can always put the rates back up later if rates really do rise or they lose too many customers. Right now, this is not really happening.
Bottom line is that they could afford to do this without losing a lot of customers since they know we can't do better anywhere else without locking in. Some of us, however, have chosen not to lock in because we like PT's rate. If it goes down, we might make another decision, in which case the liquidity could work against them.
I think they won't institute a fee yet. Oaken has not done so, and that's their main competition right now in the CDIC group.
Somebody pointed out recently that they are not making as much money as Oaken, proportionate to money invested. There could be a variety of reasons for this, but it is something to bear in mind.

December 20, 2014
5:18 pm
kanaka
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Rick said

kanaka said

I was planning on reallocating my GICs at maturity to PT. I have a question....compounding on a bank account gives better annual yield vs a GIC?.. So what would 2.5 give you in a year from a savings account vs 2.5 for a GIC. Would the savings account give you 2.7 or 2.8 vs how a GIC is compounded?

If you start a TFSA in 2015 from scratch with 37000 and put it in a 1 year GIC paying 2.5% at maturity, you'd earn 925.00 in interest. If you put it in a savings account paying compounded monthly interest at a 2.5% annual rate, in a year you'd have about 936 in interest at the end of a year if the rate holds steady throughout the year. That works out to about a 2.528% , or .028% better rate if calculated annually. There is chance that rates will go down, costing you money in the savings account, but there is a chance (long overdue IMHO) that rates could go up, costing you money in the GIC. So you’ve got to ask yourself one question: 'Do I feel lucky?' Well, do ya, punk?

Lol. I have funds in GICs and iTRADE. I was thinking to move the GIC funds to PT but can do a wait and see for a couple of months because any matured GIC will make 2% in the saving account. Then go all PT or half PT and half 5 yr GICs. If I put GICs with Hubert they can be redeemed early with penalty.

December 22, 2014
10:28 am
Greg Franklin
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If they do cut their 3.00% TFSA savings account rates it could be possible that they are preparing for raising their 2-5 year GIC, RRSP, TFSA rates as well.

I think their highest GIC, RRSP, TFSA rate is 2.60% for 5 years but I have not checked in weeks.

It has been almost 6 years now that they have this attractive 3.00% TFSA savings account rate and like Canadian Western Bank, they could follow with a lower TFSA savings account rate.

This is why savings account rates are variable. It is because they give you flexibility and accessibility, liquidity with your money but they can always adjust up but mostly down that I have found when they have maybe too much deposits or they want more fixed rate deposits so they lending them out for longer terms if demand changes.

CFF Bank for those that have the option and need liquidity, still has a 3.00% TFSA savings account rate until March-31-2014.

Take care and always compare and shop around.sf-smile

December 23, 2014
6:55 am
JustMe
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kanaka said

JustMe said

Even if rate goes to 2.5%, they will still be better than anybody else. Remember - interest is TAX FREE.
But I doubt you got that info from PT staff as they are not suppose to 'predict' future interest rates with customers - like any other bank. Please provide time/date and name of the client service rep as a proof.

But a 3.05% GIC is tax free too. Just not liquid.

Who has 3.05% GIC tax free? One year term. I really doubt...

December 23, 2014
8:08 am
Greg Franklin
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JustMe, It looks like Kanaka was referring to Oaken's 5 year TFSA GIC at 3.05% which included their 0.25% bonus rate for the full term plus 2.80% posted 5 year TFSA GIC rate.

This has now expired as of December-19-2014 but there still ia a couple CDIC insured financial institutions that have tax free 3.00%, 5 year TFSA GIC rates, State Bank of India Canada, ICICI Bank of Canada.

As Kanaka pointed out, they are not liquid. CFF Bank has a 3.00% TFSA savings account promo until March-31-2015.

My friend's son works at Toronto Hydro and has a 3.15% TFSA savings account for the last 6 months but this is only available to retirees, workers and family members that work or retired from Toronto Hydro. It is a closed bond, workplace credit union.

There is an Ontario credit union that has a 2.80% 24 month TFSA GIC rate but that is not liquid for 2 years.

I think that will be the best short term TFSA GIC rate that is available out there now.sf-smile

December 23, 2014
9:14 am
Greg Franklin
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I found this over 2 years old, December-17-2014, interesting article about TFSA's, http://www.canadianbusiness.co.....ying-tfsa/.

My spouse's friend emailed her saying that Peoples Trust is cutting their TFSA savings account rate to 2.55% from 3.00% in the new year.

I don't know how reliable this information is but we will see what happens.sf-confused

December 23, 2014
10:21 am
Loonie
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I am interested in hearing what people are thinking of doing with their Peoples Trust TFSAs.
One option is to remove it now and think about where to put it in the new year. You can always put it back if the rumour proves false.
Maybe it's time for a different kind of investment.

December 23, 2014
10:31 am
Greg Franklin
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If their TFSA savings account rates do drop to 2.55%, this is what happens when a financial institution collects 200 million in TFSA's over almost 6 years and interest rates drop as well from other financial institutions.

I don't have any TFSA accounts or any money with Peoples Trust but ING Direct back in 2011 had a 3.00% TFSA savings account rate which we did have for months but then started to drop to 2.00% and then and there, we learned our lesson that having too much money in variable accounts these days that pay the same as 3.00%+ GIC's is not good for your income, longer term part of your investments.

Peoples Trust's GIC's 2-5 years are not that attractive at most 2.60% but maybe they will increase those.sf-smile

December 23, 2014
11:35 am
kanaka
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I don't have a crystal ball, nor am I a banking guru but based on unfounded information and in the prospect of the prediction of higher rates in 2015 I wonder:

Would they leave the TFSA savings as is?

OR

If they reduced the rate would they:
Do it January 2015?
And increase their TFSA GIC a tad
And implement a transfer out fee

That way they could keep the funds til end of December 2015 for us that withdraw December and reinvest January to avoid transfer fees or they could collect a transfer fee or hope you move some of your funds to a PT GIC that is better than the predicted 2.5% but not as good as the Manitoba CUs or Oaken?

And are they aware that for the customers that remove their TFSA savings that they will likely loose all accounts from those customers?

December 23, 2014
2:35 pm
Loonie
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Bear in mind too that many people will have their TFSA in a savings account intentionally, and don't want it in a Gic, so that they can have easy access to it.

I agree, this is their most attractive product. If people withdraw their TFSAs, they will likely remove other moneys as well if they can.

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