Registered or non-registered GICs: Which should you buy?

Currently, GIC interest rates are the highest they’ve been in about 15 years, as much as 5.25%, due to a series of interest rate hikes by the Bank of Canada that began in March 2022. Generally, the longer the GIC term, the higher the interest rate. You can also choose from redeemable and non-redeemable options. Redeemable GICs are more flexible—you can cash them in anytime without penalty—but they tend to pay lower interest rates. (Learn more about how GICs work.)

Registered vs non-registered GICs: Which should you choose?

You can hold GICs in a registered or non-registered account, and you’ll need to indicate which one when you purchase the investment.

Registered accounts offer the benefit of tax sheltering, meaning that you won’t pay tax on your earnings until you withdraw them from your account—and in the case of a tax-free savings account (TFSA), you never have to pay tax.

Other registered account options include a registered retirement savings plan (RRSP), registered education savings plan (RESP), the new first home savings account (FHSA) launching in April 2023, and more. You can use existing registered savings or make a new contribution.

In an RRSP, once the account is converted into a registered retirement income fund (RRIF), the withdrawals are taxed at your marginal tax rate. However, if you withdraw the money from an RRSP before it has been converted into a RRIF, this will attract withholding taxes of 10% to 30%, depending on the amount withdrawn. In an RESP, the interest accumulates tax-deferred, and withdrawals are taxed in the hands of the RESP beneficiary.

If you hold a GIC in a non-registered account, your interest income will be taxed at your marginal income tax rate in the tax year in which you earned it. (See Canada’s current tax brackets.) In the case of multi-year GICs, you may owe tax in the year the interest accrued to you, even if it was automatically reinvested. GIC interest must be accrued and taxed annually.

Why invest in GICs?

GICs are one of the safest investments available in Canada. Your principal is guaranteed, plus GICs are eligible for coverage from the Canada Deposit Insurance Corporation (CDIC) up to $100,000 (in the unlikely event that a financial institution fails).

GICs could be suitable for your investment portfolio if:


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