Recently I’ve been trying to consolidate RRSPs.
I set up my self-directed RRSP with RBC mainly to hold my U.S. stocks so I wouldn’t be slapped with the 15% withholding tax on dividends. What I didn’t realize is that if your plan is less than $25,000, there is a $75 annual charge.
Let me take a pause and say that due to my specific situation I enjoy tax treaties and low taxes in my country of physical residence. For this reason, I have absolutely no incentive to contribute to my RRSP. The TFSA is leagues beyond the RRSP in my situation. In fact, due to my specific circumstances, even a non-registered account is better than an RRSP at this point in my life. But because I wasn’t careful enough, I am now scrambling.
So I’ve been moving assets from my other RRSP as well as taking the opportunity to add some more U.S. investments to my portfolio. Everything seemed to move over fine, except for a market-linked GIC that I have within my bank RRSP.
Last night I was on the phone with Direct Investing to transfer some U.S. shares in kind, and asked if it was normal for the GIC to take longer to transfer. The agent said if it is maturing soon, they won’t transfer it. That isn’t the case, as I bought it in 2009, and it is a 3 year GIC.
After telling him it is market-linked, he said that’s the problem, as the market-linked GICs can only be held in a regular bank RRSP, not in self-directed plans.
At first, it seemed to defy logic. I could see no reason for this kind of limitation to exist. I have since come up with a theory, but have absolutely no proof.
As it stands, I will continue to have 2 RRSPs for at least the next 2 years, as I don’t want to liquidate the GIC. I bought it when the TSX 60 was still quite low, so I think I should keep it. It is also the only fixed income product (aside from high-interest savings accounts) that I have in my portfolio.
All-in-all, it seems to me that it is just another obstacle for the small funds investor. Another way to garnish our accounts, and make a buck off our hopes.