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Ottawa, January 30, 1997
1997-005

10-Year Guaranteed Rates Announced for New Canada RRSP Bond

• Backgrounder.

Finance Minister Paul Martin today announced the interest rates for the 1997 issue (Series 1) dated March 1, 1997 of the new Canada RRSP Bond.

The first year rate will be 2.75 per cent and the rate will increase to 8.50 per cent in the tenth year. The annual compound rate of return over 10 years based on these guaranteed rates will be 6.01 per cent. Daily interest will accrue between the purchase and issue date at 2.75 per cent per annum.

"In the 1995 Budget we announced we would be changing the way we manage our retail debt and we have kept that commitment. This past fall we introduced a new Canada Savings Bond (CSB) rate structure which proved very successful with individual Canadians," said Mr. Martin. "The Canada RRSP Bond is the first new Government of Canada bond designed for retail buyers in over fifty years and marks another important step in our retail debt initiative."

The Canada RRSP Bond features guaranteed annual interest rates for 10 years, with annual compound interest starting with the first anniversary of the issue. Bondholders will be able to cash-in or transfer-out each year on the anniversary date. There are no fees associated with this product.

Jacqueline Orange, President of Canada Investment and Savings noted: "Last September, I indicated that we would develop a new investment product specifically for the RRSP investor. This new product, with its 10-year term, is unique and it allows Canadians to maximize their retirement savings without completely locking in their funds."

The new Canada RRSP Bond will be on sale from Monday, February 3 to Tuesday, April 1, 1997. There will be two issue dates: March 1 and April 1, with April 1 pricing to be announced in early March. The Minister of Finance reserves the right to terminate sales at any time.

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Backgrounder - Canada RRSP Bond

The  Canada  RRSP Bond (Series 1)

The Canada RRSP Bond is the first completely new, exclusively retail, investment and savings bond to be introduced by the Government of Canada since Canada Savings Bonds in 1946. The Canada RRSP Bond has been designed to help Canadians save for their retirement with a guaranteed, longer term investment that is both flexible and completely safe. Bondholders can elect to cash-in or transfer-out each year on the anniversary of the issue date.

Guaranteed rates for 10 years

The Canada RRSP Bond (Series 1) will provide guaranteed annual interest rates for 10 years. Interest rates for the March 1, 1997 issue date have been set as follows (column 2):

Bondholders will never earn less than these guaranteed rates, although these rates could increase before the issue date. Principal and interest on Canada RRSP Bonds are 100 per cent guaranteed by the Government of Canada.

Holders of Canada RRSP Bonds will receive $ 792.99 for each $1000 if held until the end of the tenth year with an annual compound rate of return of 6.01 per cent.

Daily interest will accrue between the purchase date and the issue date at 2.75 per cent per annum.

There are no set denominations for purchase. The minimum purchase amount is $500 per Registered Plan and there is no maximum amount that one can contribute or transfer other than the maximum contribution being subject to any applicable Registered Plan contribution limits.

Flexibility to redeem early

Canada RRSP Bonds may be redeemed or transferred annually on the anniversary of the issue date at their full face value plus earned interest. Individuals have the flexibility, at the time of purchase, to choose an earlier redemption date - from one to nine years. Or, if they wish, they can select the 10-year term and with a minimum 3 days notice, arrange to redeem or transfer to another registered investment on any annual anniversary of the issue date. Bondholders will earn the annual compound rate of return for bonds cashed on the annual anniversary of the issue date, as indicated in Column 3. Column 4 shows the growth of $1000 for each year held until the bond matures.

For example, if a bondholder wants to transfer-out from the Canada RRSP Bond to a Registered Retirement Income Fund at the end of the fourth year, the bondholder would receive an annual compound rate of return of 4.43 per cent and earn $189.35 for each $1000 held.

There is no loss in value or reduction in interest as a result of early redemption.

No fees of any kind

If you choose to hold Canada RRSP Bonds or Canada Savings Bonds in The Canada RSP, the retirement savings plan created to hold Government of Canada non-marketable securities, there are no fees of any kind.

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