# Setting up a laddered GIC at Peoples Trust



## mediaman (Feb 16, 2015)

For the fixed income portion of my portfolio, I want to set up some laddered GICs. Been checking out some rates and have two questions:

1) Rates at People's Trust are much higher than elsewhere, and are CDIC protected, so I am quite tempted to jump in. But is there a catch? Why are the rates so much higher??

2) Suppose I want to hold my GICs in an RRSP. I assume this means creating a RRSP account at PT, which is no problem, but if I currently have cash funds sitting in my existing RRSP with TD Canada Trust, is there process to move the cash, in kind, from TD to PT, so as not to trigger any withdrawals?


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## fatcat (Nov 11, 2009)

be careful of pt ...
had all my data stolen from a database just ripe for the plucking
i hadn't even purchased a gic, just the application data
which was plenty
be careful


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## AltaRed (Jun 8, 2009)

Many of us had/have accounts at PT, including through the data breach. It should never have happened, as it should not have happened at Target, Home Depot, etc. I expect PT is 'very safe' now given their experience with this debacle and I would have no qualms recommending PT at this point. 

Best I can tell, there is no catch to their highly competitive rates, but like anything else, they may not have the best rates in the future. I would not be 'beholden' to any one of the online banks for this reason. It becomes a 'what if' question on whether it is worthwhile 'chasing rates'. 

To respond to your second question, you should be able to do a partial transfer of your RRSP at TD to a RRSP at PT, i.e. X$ of cash. You fill out a form with PT and they will initiate the transfer. TD will charge a fee for the administration work involved. Before you go this route, get a PT rep on the phone and ask that specific question.


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## christinad (Apr 30, 2013)

The good thing about peoples trust are there are no transfer fees so if there are better rates somewhere else in the future you can switch.


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## mediaman (Feb 16, 2015)

Thanks for the info and advice. Appreciate it. 

The data beach is a bit much. A CDIC insured financial institution should be held to a much higher standard than Target and Home Depot. I think I may have found the catch I was looking for.


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## mediaman (Feb 16, 2015)

Did some more follow-up on the data breach, and the horror stories affected customers posted relating to credit issues following the hack. 

As well, it blew me away how, in their response, PT clearly has a blatant disregard for protecting names, dates of birth and SIN numbers :

"_However, there was no evidence that customers’ information was actually taken from the database. This database was totally separate from our banking system, so no banking information, such as balances, account numbers, logins or passwords could be obtained. The personal information that may have been accessed includes customer name, address, telephone number, email address, date of birth and social insurance number.”_

Non-starter for me.


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## canucked_up (Feb 23, 2014)

Be careful of everything... http://www.informationisbeautiful.net/visualizations/worlds-biggest-data-breaches-hacks/ ...its plenty dangerous out there. I'd tend to be more worried about my annual notice of assessment coming in the mail with my name, address and SIN on it. More apt to be useable by someone actually in the same country. A link to those "horror stories" would be appreciated, as i would then know what to expect.

It just occurred to me that this breach is old news. You wouldn't happen to be a mediaman associated with a different financial institution?? :biggrin:


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## fatcat (Nov 11, 2009)

mediaman said:


> Did some more follow-up on the data breach, and the horror stories affected customers posted relating to credit issues following the hack.
> 
> As well, it blew me away how, in their response, PT clearly has a blatant disregard for protecting names, dates of birth and SIN numbers :
> 
> ...


exactly as they say, they got my name, address, phone number,email, date of birth, sin number 

wtf else do you need to open a new line of credit !!!

their rates couldn't be high enough for me to deal with them again

look at oaken who have treated me lot better


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## mediaman (Feb 16, 2015)

canucked_up said:


> A link to those "horror stories" would be appreciated, as i would then know what to expect...


Just google it...

http://forums.redflagdeals.com/peoples-trust-privacy-breach-one-year-anniversary-1584321/

http://www.thestar.com/business/per...ust_warns_clients_about_security_roseman.html

https://www.highinterestsavings.ca/forum/peoples-trust/peoples-trust-privacy-breach-class-action/

http://canadianmoneyforum.com/showthread.php/16531-Security-breach-at-People-s-Trust

http://www.financialwisdomforum.org/forum/viewtopic.php?t=116542​
As one customer put it, it was the gift that keeps on giving. Apparently its NOT old news as it still haunts those affected.

Very happy I asked! I would never take such a risk knowing what I now know. They lost my "trust". 

But to each his own.


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## gibor365 (Apr 1, 2011)

> exactly as they say, they got my name, address, phone number,email, date of birth, sin number
> 
> wtf else do you need to open a new line of credit !!!


If it would be so simple to open LoC in Canada 



> you should be able to do a partial transfer of your RRSP at TD to a RRSP at PT


The problem with RRSP in PT ... you can only have GIC RRSP and cannot have cash RRSP account.... so when your RRSP GIC matures , it will be renewed automatically or you need to submit T2033 from another institution tp transfer money out... This is why i have in PT only cash GIC ladders


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## gibor365 (Apr 1, 2011)

AltaRed said:


> Many of us had/have accounts at PT, including through the data breach. It should never have happened, as it should not have happened at Target, Home Depot, etc. I.


Data breach can happen everywhere.... 
http://www.pcworld.com/article/2453400/the-biggest-data-breaches-of-2014-so-far.html










Credit cards also frequently getting compromized.... so what, not to used them at all?


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## mediaman (Feb 16, 2015)

gibor said:


> Data breach can happen everywhere....


True, but personal financial data at a federally-regulated CDIC-insured industry-approved financial institution should have the highest level of data security. PT didnt seem to care. Exposing a SIN number is not the same as exposing ebay purchase history.



gibor said:


> Credit cards also frequently getting compromized.... so what, not to used them at all?


Hardly the same situation. Card gets compromised, any charges get reversed, new card gets issued, no privacy data sent to China. no credit rating impact. Its totally different.


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## gibor365 (Apr 1, 2011)

mediaman said:


> True, but personal financial data at a federally-regulated CDIC-insured industry-approved financial institution should have the highest level of data security. PT didnt seem to care. Exposing a SIN number is not the same as exposing ebay purchase history.
> 
> 
> Hardly the same situation. Card gets compromised, any charges get reversed, new card gets issued, no privacy data sent to China. no credit rating impact. Its totally different.



As far as I remember PT improved security after this "breach".... maybe by CDIC request...don't know....
And what is so - un-reversable with exposing SIN number? imo it's more dangerous if somebody steals my credit card id... btw, there wasn't impact on our credit rating (even though I don't really care ...paid off mortgage, no any debt and not planning to get any loans), just 3 months ago applied and got w/o any problems Amazon Visa.
On other hand, using PT and Tangerine promotions, I get about $4,000 more annually ....


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## AltaRed (Jun 8, 2009)

mediaman said:


> True, but personal financial data at a federally-regulated CDIC-insured industry-approved financial institution should have the highest level of data security. PT didnt seem to care. Exposing a SIN number is not the same as exposing ebay purchase history.
> 
> 
> Hardly the same situation. Card gets compromised, any charges get reversed, new card gets issued, no privacy data sent to China. no credit rating impact. Its totally different.


I agree data breaches should never happen at the databanks of financial insitutions where personal info such as date of birth, SIN, etc. is compromised. The fact is, we really don't know how pervasive this is, because AFAIK, financial institutions are not obliged to disclose about data breaches. There could be many we are unaware of. At least PT fessed up and paid for 'flags' to be placed on our credit files at Equifax so that anyone seeking our credit information must first call us. Given their experience, I suspect PT is now more careful than most.


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## gibor365 (Apr 1, 2011)

> Given their experience, I suspect PT is now more careful than most


 How we say in Russian, "bomb doesn't hit same funnel twice' 

btw, JPMorgan has for sure more sophisticated security than PT, but still


> JPMorgan Chase last week confirmed that hackers managed to access personal data for more than 83 million customers, including 76 million households and seven million small-business online accounts, but The New York Times reveals that the largest bank in the U.S. isn’t the only one to have been hit. It appears that other nine, unnamed, financial institutions have also been targeted by the same mysterious hackers group, which also managed to steal some critical security data from JPMorgan on top of personal data.


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## Eclectic12 (Oct 20, 2010)

mediaman said:


> True, but personal financial data at a federally-regulated CDIC-insured industry-approved financial institution should have the highest level of data security. PT didnt seem to care...


You mean like the Canadian insurance company who thought they had it covered by hiring a major outsourcing company for maintenance/security ... until a hard drive walked out the computer centre door with far more than name, address & SIN?

At the end of the day, it's who has access and what happens.


Cheers


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## Flash (Nov 25, 2014)

Or like the NSLSC which apparently "lost" a hard drive containing all the information about student loans


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## Beaver101 (Nov 14, 2011)

For the laddered-GICs experts here - has anyone done a compare on the final yield given off by this ladder-mechanism versus a tiered-GIC one such as the BMO's RateRiser? Of course, the interest rates have to be comparable.


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## lonewolf (Jun 12, 2012)

christinad said:


> The good thing about peoples trust are there are no transfer fees so if there are better rates somewhere else in the future you can switch.


 I would get that one in writing for RRSP accounts. I think one of the reasons laddered GICs are promoted so much is so the banks can make more on transfer fees when customer switches to another institution with a higher interest rate & or the customer wont switch because money coming due it will not pay to switch to another institution because the amount will be to small & the fee will eat up to much of capital. The ladder is not always the best approach, do not make as much money in interest when starting it & fees can kill the account if switching to another institution for higher interest.


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## canucked_up (Feb 23, 2014)

mediaman said:


> Just google it...
> 
> http://forums.redflagdeals.com/peoples-trust-privacy-breach-one-year-anniversary-1584321/
> 
> ...


"to each his own" - Fair enough.
I reread all your links, as I did follow this at the time. There is not one "Horror Story".
"haunts" LOL, dramatic much?
Your points and opinion are valid, your embellishments... not so much.


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## AltaRed (Jun 8, 2009)

Beaver101 said:


> For the laddered-GICs experts here - has anyone done a compare on the final yield given off by this ladder-mechanism versus a tiered-GIC one such as the BMO's RateRiser? Of course, the interest rates have to be comparable.


No, but those I have seen in the past are not competitive with a true 5 yr GIC ladder. The current BMO RateRiser rates are awful (5 yr annual compound equivalent at 1.36%) although to compare standard bank GICs with what is available from online insitutions or discount brokerages is like apples and oranges. 

My 5 yr GIC ladder which has been in place for many years is now paying just under 3%, sliding a bit each year as each 'old' 5 year GIC matures and is replaced with one at a lower interest rate (current best 5 yr rate I believe at a discount broker is about 2.15%).


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## Beaver101 (Nov 14, 2011)

AltaRed said:


> No, but those I have seen in the past are not competitive with a true 5 yr GIC ladder.


 ... I did a quick compare using only bank rates (not discount brokerage in order to make apples to apples comparison) and it would seems to be the case that current low interest rates to build a true 5 year GIC ladder would not yield better than the RateRiser compound equivalent (1.36% as awful it is what it is). 



> My 5 yr GIC ladder which has been in place for many years is now paying just under 3%, *sliding a bit each year as each 'old' 5 year GIC matures and is replaced with one at a lower interest rate *(current best 5 yr rate I believe at a discount broker is about 2.15%).


 ... isn't this 5 year ladder method not working what it is supposed to or intended for? That's to ladder up or capture the highest rate of the 5 year term? Of course, the declining interest trend doesn't help.


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## AltaRed (Jun 8, 2009)

Beaver101 said:


> ... isn't this 5 year ladder method not working what it is supposed to or intended for? That's to ladder up or capture the highest rate of the 5 year term? Of course, the declining interest trend doesn't help.


It is working as intended. I always have 5 year rates in the ladder whatever they are at the time a 5 year GIC is renewed. Once interest rates start to turn around, then each maturing GIC will capture increasing interest rates. 

I also dispute that the rateriser GIC will match bank 5 yr GIC rates. A fully operational 5 yr GIC ladder always has 5 yr interest rates in each and every GIC in the ladder. What was the 5 yr rate in 2010 (the 5 yr GIC just maturing this year)? And the 5 yr rate in 2011? and 2012? and 2013? and 2014? Those are the rates the GICs would have in a 5 year GIC ladder.


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## Beaver101 (Nov 14, 2011)

AltaRed said:


> It is working as intended. I always have 5 year rates in the ladder whatever they are at the time a 5 year GIC is renewed. Once interest rates start to turn around, then each maturing GIC will capture increasing interest rates.


 ... it is without doubt the longer the term (in this case 5 years) of the GIC, the rate would be higher. But why do you require interest rates to start turn around if the intent of the ladder is to work as it is supposed to with "rising" interest rates? What I'm trying to say is with this declining interest rates environment, the ladder isn't working the way it supposed to or as good as it supposed to. 



> I also dispute that the rateriser GIC will match bank 5 yr GIC rates.


 ... I agree that a RateRiser GIC will not match or to be advantageous over a straight 5 years term (compounding) GIC. 



> A fully operational 5 yr GIC ladder always has 5 yr interest rates in each and every GIC in the ladder.


 ... agree. 



> What was the 5 yr rate in 2010 (the 5 yr GIC just maturing this year)? And the 5 yr rate in 2011? and 2012? and 2013? and 2014? Those are the rates the GICs would have in a 5 year GIC ladder.


 ... unfortunately no rates history from BMO but taking from Tangerine (ING previously), 5 years GIC rate in (Sep1)2010=3%, (Aug25)2011=2.5%, (Jul5)2012=2.25%, 2013 not posted but assumed hasn't changed from 2012=2.25%, (Feb13)2014=2.55%. Needless to say, the interest rates trend has been a decreasing one so back to my original comment that this 5-year-Ladder-GIC mechanism doesn't work well in this low interest rate environment. In fact, I went back to the calculations board on the BMO RateRiser (cashable too) versus a 5 year Ladder GIC (assuming the 5 year GIC term rate remains static), the RateRiser comes out ahead by about a .25% after the 5 years term. My comments (arguments?) here is just to get a better understanding of a Ladder GIC and determine whether it is a better strategy for the long term using current pitily interest rates. 

Disclaimer: I do not work for BMO, just bank with them so as to use their product for competitiveness comparison.


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## AltaRed (Jun 8, 2009)

No idea how you can come to the conclusion you did. What matters is what you get each and every year for your capital compounded over time. All the BMO RateRiser gets for you is 1.36% annual compound over the 5 years. The rate in year 5 means nothing if you get virtually nothing in year 1. 

IOW, using your own Tangerine data, your weighted average return today (in a 5 year GIC ladder) with 5 year GICs purchased over the past 5 years is 12.55/5 or 2.51%. Once that 3% GIC matures later this year, you might be able to only replace it with a 2.1% GIC, so in 2016, your weighted average return will be 11.65/5 or 2.33%. Then let's say interest rates turn up in 2016 and the 5 year rate becomes 2.5%. You would replace the maturing 2011 GIC @ 2.5% with a new one at 2.5%, and your weighted average return remains as it is. Rinse and repeat for every year forward for as many years as you like. The point is that ladder will always give you a 5 weighted average 5 year return each and every year. 

This is essentially the same way a short term bond ETF works. The average short term bond ETF has a duration of 2.5 years, same as a 5 year GIC ladder. But the GIC ladder provides a better return (no MER). What you give up with a GIC ladder is liquidity in that you have to wait for upwards of one year to access some of the funds whereas in a ST bond ETF you can theoretically sell at any time.


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## andrewf (Mar 1, 2010)

^Also, GICs are more tax efficient that traditional bond funds.


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## OnlyMyOpinion (Sep 1, 2013)

Beaver - you are correct, in a long-term decreasing rate environment you will be 'averaging down', and the opposite in an increasing rate environment. So you are getting the best rate on a 5yr rolling basis. 
But laddering is not used only when rates are expected to rise. It is used to allocate a fixed income, guaranteed portion of your portfolio to a plan that sees 1/5 become available to you each year. You may use that matured amount for income, or for a different investment, or for another 5yr guaranteed rate. 
We all recognize that it is likely to be the lowest return portion of our portfolio but it still a valid portion of many portfolios.


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## gibor365 (Apr 1, 2011)

> It is used to allocate a fixed income, guaranteed portion of your portfolio to a plan that sees 1/5 become available to you each year. You may use that matured amount for income, or for a different investment, or for another 5yr guaranteed rate.


 but why you "fixed" on 5 years?! You may have short term ladder , for example in mentioned PT, with much higher rate that 5y in any major bank... Have 2 years ladder , and every 1-2 months some $ become available


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## OnlyMyOpinion (Sep 1, 2013)

Gibor - No reason I couldn't have continually maturing 2yr GIC's rather than continually maturing 5yr, but a 5yr GIC typically pays higher interest so I'm not sure why I'd want to do that?


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## gibor365 (Apr 1, 2011)

OnlyMyOpinion said:


> Gibor - No reason I couldn't have continually maturing 2yr GIC's rather than continually maturing 5yr, but a 5yr GIC typically pays higher interest so I'm not sure why I'd want to do that?


With shorter terms, liquidity is such higher... As an example, Tangerine very frequently doing promotions on NEW money, last years they have maybe 8 months out of 12 promotions with 2.5-3% on HISA than higher than any 5 years GIC available, and if I have matured available money every months , its easy to use those promotions...


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## OnlyMyOpinion (Sep 1, 2013)

Could do, but over the years we moved away from 'carrying the suitcase' from one place to another to get the absolute highest GIC (or HISA) rate. We just try to squeeze the max discretionary rate we can from our one-stop institution. Its just much easier to keep track of. At best these days you're lucky to maintain purchasing power no matter where your GIC/HISA money is. It is the other portion(s) of your portfolio that you have to count on for any real growth.


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## AltaRed (Jun 8, 2009)

OnlyMyOpinion said:


> Could do, but over the years we moved away from 'carrying the suitcase' from one place to another to get the absolute highest GIC (or HISA) rate. We just try to squeeze the max discretionary rate we can from our one-stop institution. Its just much easier to keep track of. At best these days you're lucky to maintain purchasing power no matter where your GIC/HISA money is. It is the other portion(s) of your portfolio that you have to count on for any real growth.


Ditto. Chasing rates around the various institutions can produce some incremental returns in the short term but anything requiring a conscious decision to decide on term is market timing. Some you win, some you lose. If one is in love with PT, it is a pretty good place for such a 5 year GIC ladder.

Over at least the duration period (2.5 years), a 5 year GIC ladder will beat all other lesser term GIC ladders. It is easy enough to have 10 GICs, or even 15 GICs, in a 5 year ladder, having one mature every 6 months or 4 months, or whatever, as one wishes. Liquidity is then not an issue. Keeping money in a 1.5-1.8% HISA just in case I can grab a 2-2.5% promotion if and when it comes, is likely at best, a breakeven case. My HISA money is set aside for equity buying opportunities, etc, etc.

The reason to have a 5 year GIC ladder to begin with is for it to be part (or all) of one's longer term FI allocation. It is not necessarily right for everyone. For me, it has been the bulk of my FI and will serve me well when I start RRIFing in a few years. Like OMO, the logistics of managing a 5 year ladder at multiple institutions is too much bother for me....and I would need to be at multiple institutions to stay within CDIC anyway.


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