Real Return Bonds

[ghariton]

Hmmm.... most of the links don't seem to work.

Hi Georges,

I'm still here and still holding my stripped RRBs.

AFAIK, the "public area" links on the web site work just fine.

Gosh, Ellis, I hadn't recognized you. Still, I should have figured it out from the profile to which Shakespeare linked.

Nice to know you're here.

Georges

[ghariton]

Yield on the 2021 is down marginally to 1.64%, according to today's Globe and Mail.

Up marginally to 1.47%, according to today's Globe & Mail.

My wife retired last month and just got her lump-sum severance. Now what?

Georges

[Feeonly.ca]

My wife retired last month and just got her lump-sum severance. Now what?

Hi Georges,

You don't normally get "severance" when you retire. What was the circumstance?

[Shakespeare]

If she worked for the government, you do indeed get a lump-sum payment when you retire - I got $12K.

($500K settlements weren't available at my level. )

[ghariton]

My wife retired last month and just got her lump-sum severance. Now what?

Hi Georges,

You don't normally get "severance" when you retire. What was the circumstance?

I may have used the wrong word -- it may be a retiring allowance. When a public servant retires from the federal public service, he or she gets, in addition to an ongoing pension, a lump-sum payment equal to one week's pay for each year's service (except for the first year of service, which entitles you to two weeks' pay). Most of it can be rolled into an RRSP, using the usual rules.

In my wife's case, she has 16 years' service. (She stayed home with the kids and worked on contract for many years.)

Georges

[Shakespeare]

it may be a retiring allowance

I believe that is the correct designation.

[Bylo Selhi]

Most of it can be rolled into an RRSP, using the usual rules.

In my wife's case, she has 16 years' service.

The rules have changed over the years with higher RRSP limits in earlier years. From CRA:

A retiring allowance rollover can be transferred to a registered retirement savings plan (RRSP) to defer tax. This is in addition to the normal limits for RRSP contributions. A portion of a retiring allowance may be transferred to an RRSP. An individual may transfer up to $2,000 for each year of service before 1996 plus up to $1,500 for each year of service before 1989 in which no pension or deferred profit-sharing plan benefits were earned. The 1995 budget eliminated the rollover for years of service after 1995 given the maturation of pension plans and the ability to carry forward unused RRSP limits.

BTW this doesn't apply just to civil servants or retirees. Anyone who leaves a job where they were employed prior to 1996 can apply a lump sum of employment income, be it unused vacation days, credit for overtime or sick days not used, etc. to their RRSP tax-free. Make sure the employer designates the payment as a retiring allowance and that the money goes straight into the RRSP in order to avoid withholding taxes. (There's a designation on the T-4 too IIRC.)

[Gus]

I was given a severance package this year, which I am hardly able to shelter at all. My employer had a defined benefit scheme and the 2004 contributions triggered a Pension Adjustment that leaves me with very little contribution room in 2005. To add insult to injury, there were no contributions made to my DB pension in 2005, since I was let go in early January. So, this year, which may be the last ever when I am in the top marginal tax bracket, is one year when I can shelter no income. I joined the company in 1998, so no rollovers are allowed.

I think I'm SOOL on this one.

[Ken]

I was given a severance package this year, which I am hardly able to shelter at all. My employer had a defined benefit scheme and the 2004 contributions triggered a Pension Adjustment that leaves me with very little contribution room in 2005. To add insult to injury, there were no contributions made to my DB pension in 2005, since I was let go in early January. So, this year, which may be the last ever when I am in the top marginal tax bracket, is one year when I can shelter no income. I joined the company in 1998, so no rollovers are allowed.

I think I'm SOOL on this one.

I believe that retirement allowances, up to $2000 per year (an old number which may have changed), might be treated separately from your current RRSP room. But since the last time I had one was about 15 years ago, I could be out to lunch. However, since I work in payroll (on the programming side, not the business side), I do at least know that companies regularly provide lump-sum payments and call them "retirement allowance". Presumably this is because there is a tax advantage to doing so.

[scomac]

I believe that retirement allowances, up to $2000 per year (an old number which may have changed), might be treated separately from your current RRSP room.

This topic was discussed in the past couple of sessions of the Investment Planning course I'm currently taking. I don't have any specific notes as it was more of a tangenital discussion. IIRC the instructor indicated that a severance package or retirement allowance could be rolled directly into an RRSP regardless of whether there is contribution room or not. He didn't indicate that there was any cap on the amount that could be rolled in.

Hopefully someone (Norbert?) familiar with the rules will clarify this.

Scott

[Bylo Selhi]

I was given a severance package this year, which I am hardly able to shelter at all. My employer had a defined benefit scheme and the 2004 contributions triggered a Pension Adjustment that leaves me with very little contribution room in 2005. To add insult to injury, there were no contributions made to my DB pension in 2005, since I was let go in early January. So, this year, which may be the last ever when I am in the top marginal tax bracket, is one year when I can shelter no income. I joined the company in 1998, so no rollovers are allowed.

I think I'm SOOL on this one.

I believe that retirement allowances, up to $2000 per year (an old number which may have changed), might be treated separately from your current RRSP room. But since the last time I had one was about 15 years ago, I could be out to lunch. However, since I work in payroll (on the programming side, not the business side), I do at least know that companies regularly provide lump-sum payments and call them "retirement allowance". Presumably this is because there is a tax advantage to doing so.

See my CRA quote three posts up, specifically "This is in addition to the normal limits for RRSP contributions."

[scomac]

See my CRA quote three posts up, specifically "This is in addition to the normal limits for RRSP contributions."

Dohhhh!!!

[Shakespeare]

tangenital discussion

Dear, oh dear. I hope nobody er, overexposed and got sunburned.

[Bylo Selhi]

Anybody know about these puppies? Province Of Ontario Real Return Bonds [PDF]

According to this they were launched on 28Sep05 but they're not listed here. Did the ship go aground?

[Feeonly.ca]

Yup, I posted about them on Sept 30th. (see below)



Posted: Fri Sep 30, 2005 11:46 am
Post subject: Ontario issues RRB's

-------------------

It's nice to see some more RRB selection, albeit a small offering.

I'm not sure if the Ontario 1.93% is the coupon or the effective real yield.

The 30 year Bank of Canada RRB is currently priced for a real yield of ~1.65%.

From todays Globe & Mail:

Friday, September 30, 2005

Ontario bond sale proves popular

Ontario got a warm reception for its first issue of inflation-linked bonds.

The province sold 30-year debt this week that offered a 1.93-per-cent annual interest rate, plus inflation, as expressed by the Consumer Price Index. Ontario planned to sell at least $250-million of bonds, and was able to bump the offering up to $700-million in the face of strong demand from institutional investors. Pension funds and insurers that must pay retirees inflation-linked benefits were the primary buyers. RBC Dominion Securities Inc. led the sale. Staff
_________________
Planning Pays Dividends

[ghariton]

What's a good online source for the yield on various TIPS?

(I'm tired of telephoning TD, and they're probably tired of me doing it.)

Thanks

Georges

[Bylo Selhi]

What's a good online source for the yield on various TIPS?

TIPS or RRBs? The former (from the horse's mouth): Bloomberg

For RRBs, any edition of the G&M. Online, start here and look for the item "CANADIAN BONDS." (The URL changes daily so I can't provide a general link.)

Yup, I posted about them on Sept 30th.

Yeah, I know. But why aren't they listed on the Gov ON website or on the G&M's bond page? Is this another private placement a la Hwy407 RRBs?

[Feeonly.ca]

But why aren't they listed on the Gov ON website or on the G&M's bond page? Is this another private placement a la Hwy407 RRBs?

It was a tiny offering and likely presold. I don't think the Globe reports pricing for the Quebec RRB's so I very much doubt these will be covered.

Someone may have even approached the Ontario Govt with a specific offer. I would be interested to know if this is a one off or is this part of a new ongoing program.

[ghariton]

(from the horse's mouth): Bloomberg

Thanks, Bylo. I should have known

Georges

[Shakespeare]

There's also TIP.

[Bylo Selhi]

Only available in Britain? Pity!

iShares € Inflation Linked Bond ETF [PDF] "gives investors exposure to the performance of the euro zone government inflation linked bond market."

The Company has not been, nor will it be, qualified for distribution to the public in Canada as no prospectus for the Company has been filed with any securities commission or regulatory authority in Canada or any province or territory thereof. This document is not, and under no circumstances is to be construed, as an advertisement, or any other step in furtherance of a public offering of shares in Canada. No person resident in Canada for the purposes of the Income Tax Act (Canada) may purchase or accept a transfer of shares in the Company unless he or she is eligible to do so under applicable Canadian or provincial laws.

BTW, according to this, other new FTSE-listed ETFs include, inter alia:

iShares DJ Euro STOXX Select Dividend: Like the DVY in the U.S., only for Europe – this fund tracks the 30 highest yielding equities in the Eurozone, relative to their home market.
iShares FTSE/EPRA European Property Index Fund: This fund invests in real estate and property companies in ten European countries, with a heavy weighting in Holland and France.
iShares FTSE UK Dividend Plus: The high-yield fund tracks the 50 highest yielding equities in the Eurozone UK, with stocks selected from the FTSE 350 Index. The historic yield on this fund is an impressive five percent.

Also, "BGI plans to roll the new funds out across Europe over time" though presumably our regulators will "protect" us from those as well.

[Feeonly.ca]

Dispite the caveat above you should be able to purchase any publicly traded FTSE-listed stock or ETF via your broker provided they have a reciprical relationship with a UK broker.

Sometime back RBC Action Direct was able to quote me in this fashion on actual OAT€i's, the Euro-denominated inflation-indexed bonds.

There would be double commision(s) involved to buy and to sell.

[Bylo Selhi]

Dispite the caveat above you should be able to purchase any publicly traded FTSE-listed stock or ETF via your broker provided they have a reciprical relationship with a UK broker.

That's interesting, especially in light of "No person resident in Canada for the purposes of the Income Tax Act (Canada) may purchase or accept a transfer of shares in the Company unless he or she is eligible to do so under applicable Canadian or provincial laws." Remember the furor over changes to ITA with respect to NRTs and FIEs? Perhaps this is a veiled warning that these ETFs aren't exempt like US-listed ETFs and investors may be required to mark them to market for tax purposes. (Although strictly speaking the wording says they're illegal, not just taxed egregiously.)

[CalgaryGuy]

Dispite the caveat above you should be able to purchase any publicly traded FTSE-listed stock or ETF via your broker provided they have a reciprical relationship with a UK broker.

That's interesting, especially in light of "No person resident in Canada for the purposes of the Income Tax Act (Canada) may purchase or accept a transfer of shares in the Company unless he or she is eligible to do so under applicable Canadian or provincial laws." Remember the furor over changes to ITA with respect to NRTs and FIEs? Perhaps this is a veiled warning that these ETFs aren't exempt like US-listed ETFs and investors may be required to mark them to market for tax purposes. (Although strictly speaking the wording says they're illegal, not just taxed egregiously.)

Is this an issue with these etfs or or all foreign shares? It can't be taboo to own the foreign shares. You can hold shares from the following exchanges in your rrsp:

Prescribed stock exchanges outside Canada
in Australia, the Australian Stock Exchange
in Spain, the Madrid Stock Exchange
in Austria, the Vienna Stock Exchange
in Sweden, the Stockholm Stock Exchange
in Belgium, the Brussels Stock Exchange
in Switzerland, the Zurich Stock Exchange
in France, the Paris Stock Exchange
in the United Kingdom, the London Stock Exchange

...list goes on full list in this doc:
http://www.cra-arc.gc.ca/E/pub/tp/it320r3/it320r3-e.pdf

I checked out hsbcdirect. They appear let you buy shares on the ftse .
Its a 55 Euro commission (min) plus a 50 euro "levee" . So minimum cost of 105 euros. pretty steep.

[Shakespeare]

If they [iShares € Inflation Linked Bond ETF] were held in an RRSP "mark-to-market" rules, if applicable, would be irrelevant.

Provided they could be held in an RRSP, of course.