savings certificate

Canada Savings Bond

Canada Savings Bonds are investment instruments offered by the Government of Canada on sale between October and April every year. Unlike a true marketable bond, Canada Savings Bonds or CSBs are debentures.

The financial product is issued by the Bank of Canada and claims to offer a competitive rate of interest and has a guaranteed minimum interest rate.

Types of CSBs

Canada Savings Bonds are purchasable in regular and compounding interest. These bonds are cashable at any time and come in denominations of $100, $300, $500, $1000, $5000, and $10000 (regular interest bond's lowest denomination is $300). Interest rate is guaranteed for 1 year and fluctuate with market conditions for the remaining 9 years until its maturity. They are green, and pictures the Clock Tower of the Parliament building in Ottawa. The new series as of November 1st, 2006 picture the Cenotaph in Ottawa.

Canada Premium Bonds are purchasable in regular and compounding interest. These bonds differ from the regular bonds in that they are only cashable on the anniversary of the issue date or during the 30 days thereafter. They come in denominations of $100, $300, $500, $1000, $5000, and $10000 (regular interest bond's lowest denomination is $300). They are sold with rates up to year 3 with each subsequent year offering higher interest. The interest rate fluctuates for the remaining 7 years with market conditions until its maturity. Previously, the rates were determined for 5 years and fluctuated for the last 5 years. The bonds were maroon in color and feature a picture of the Library of Parliament in Ottawa. But the new series as of November 1st 2006 are golden in colour and picture the National War Museum.

Canada Investment Bonds were bonds available only through investment brokers and were offered from October 1st, 2003 and April 1st, 2004. They are non-redeemable until maturity and had 3 year maturities. Only 6 different series were issued. They are currently unavailable.

Plans offered through CSBs

Usually CSBs are purchased at a financial institution or online at the CSB website and certificates are mailed to the investor. However there are a few plans available in which certificates are not issued.

  • Canada RSP is a no-fee registered retirement savings plan (RRSP) designed specifically for holding compound interest Canada Premium and Canada Savings Bonds
  • Canada RIF no-fee registered retirement income fund (RRIF) designed specifically for holding the Canada Premium and Canada Savings Bond directly in an RRIF
  • Payroll Deduction Employers can provide employees this plan during sale periods. Employees choose how much they would like deducted off their paycheques and it is automatically saved until the employee would like to withdrawal. This is also eligible for the Canada RSP.


Introduced as Victory War Bonds in 1946, they are safe means of investment and savings versus mutual funds and stocks as each bond is guaranteed by the Bank of Canada. Before CSBs, Canada issued other instrument similar to CSBs:

  • Canada - Dominion War Savings Certificate (1944)
  • Canada Fourth Victory Loan (1943)
  • Dominon of Canada Victory Loan (1942)

Over the years, CSBs proved to be popular investments as they were flexible, safe and convenient way to invest. They are popular especially among younger children as the minimum purchase amount is relatively low ($100). Many grandparents purchase these for their grandkids rather than giving cash for birthdays and Christmas.

Recently, sales of the bonds have declined. This is due to the low interest rate environment that has plagued yields for investors and has caused a shift from Savings Bonds to more risky investments such as stocks and mutual funds. The yields are especially low considering their long term investment structure (10 year maturity). Rates in the 1980s were as high as 18% per annum. Also, many financial institutions have started to introduce high interest savings accounts which often beat rates for CSBs as well as give even more flexibility with access at anytime and on the internet. CSBs have been criticized for not being online friendly for bonds cannot be held electronically and certificates are only issued. Between April 2005 and April 2006, CSBs held by Canadians fell by more than 10%. As of April 2006, $19.2 Billion worth of CSBs are currently held by Canadians.

Program Cancellation?

In 2004, consultants gave the Department of Finance a report suggesting the CSB program be scrapped, giving an overall program cost savings of about $650 million in 9 years. And with record budget surpluses recorded by the Liberal government since 1997 and the current Conservative government's paydown in October 2006, the importance of CSBs to finance the government has waned. Then finance minister Ralph Goodale rejected the recommendation, and opted to have the program changed to be more competitive and attract investors. The intentions of the current Conservative government are not known.

Many Canadians still rely on this program for their investment portfolio, and the program is recognized by 2 out of 3 Canadians as their first investments [1].This program recognition may give potential to an improved and more popular program. This may suggest that the program may not be scrapped for many years to come.

See also

External links

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