Registered vs. Non-Registered GICs

The main difference between registered and non-registered GICs is that registered GICs are held in investment accounts that receive special tax privileges.

Your savings grow tax-free in a registered guaranteed investment certificate (GIC), but there are contribution limits. With a non-registered GIC, you can contribute as much as you’d like, but earnings are taxed.

There are many different types of GICs you can choose from, but figuring out where to hold your GIC is more complicated — especially when interest rates and potential GIC returns are rising.

Storing investments in a registered GIC could save you money come tax time. But choosing a non-registered GIC allows you to invest an unlimited amount of money and chase more returns.

To help you choose the best GIC for your financial goals, let’s explore the difference between registered and non-registered GICs.

What is a registered GIC?

A registered GIC is a GIC held in an account registered with the Canadian federal government that allows you to grow your savings tax-free. Registered accounts include:

You won’t pay taxes on any interest earned on your GIC while it’s in these accounts, which can be especially advantageous if interest rates are rising and you’re able to invest a significant amount of money.

Registered accounts, however, come with important rules, such as age limits when you can start contributing or withdrawing funds. You also need to be mindful of contribution limits. Make sure these limits align with your overall investment goals so you can avoid paying any penalties.

Pros and cons of registered GICs

Pros

Interest earnings are not taxed while your money is invested.
Low risk because your principal investment is guaranteed.
Ideal for long-term savings goals such as retirement or a child’s education.

Cons

Investors must be aware of contribution limits and age restrictions.
Some accounts (RESPs and RRSPs) are for long-term savings and have withdrawal limits, so it can be penalizing to withdraw your funds even if your GIC matures and you have other financial needs.
RESP contributions can only be used towards education expenses.

What is a non-registered GIC?

A non-registered GIC is a GIC that isn’t held in a special registered account. Non-registered accounts are not regulated by the government and don’t come with any tax breaks or incentives. However, they don’t have any age restrictions or contribution limits for you to worry about, though many financial institutions have a minimum required investment for GICs.

Examples of non-registered GICs include:

Pros and cons of non-registered GICs

Pros

Typically offer a more flexible access to your funds than registered GICs. There may be penalties if you withdraw funds before the term ends.
No contribution limits.
No age restrictions.

Cons

All earnings are taxed and need to be claimed as investment income.

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How to choose between registered and non-registered GICs

Consider your savings goals. What is the money in the GIC for?

If your goal is something like saving for your retirement or your child’s education, a registered GIC in the appropriate account (RRSP or RESP) is likely a good idea. If you’re saving for a wedding or a down payment to buy a house in a few years, a registered GIC in a TFSA could be a good option.

Longer terms typically give your money more time to grow, and registered GICs allow you to avoid paying taxes on your earnings. But don’t forget to keep an eye on your contribution room. If you’ve already maxed out your RRSP, TFSA or RESP for the year, choose a non-registered GIC so you don’t over-contribute and face penalties.

If you’re saving for a more immediate goal or an emergency fund, a non-registered GIC is probably a better bet, since they’re more flexible and it’s easier to access your money if you need it.

Remember that most GICs lock your money away for a set amount of time. So choose a term that matches your savings timeline to make the most of your GIC by leaving it alone until it matures. And if you’ve been avoiding GICs because of their typically low interest rates compared to other investment options, a rising interest rate environment might be a good time to re-examine the rates currently being offered.

GIC interest rates vary based on term, type and financial institution. Compare today’s best GIC rates to determine which kind of GIC best fits your financial goals.

Registered GICs are held in investment accounts registered with the federal government that receive unique tax advantages, like RRSPs or TFSAs. Non-registered GICs are held in non-registered accounts and do not receive the same tax benefits.

About the Authors

Clay Jarvis

Clay Jarvis is NerdWallet’s mortgage and real estate expert in Canada. Thus far, his entire professional writing career has revolved around real estate. Prior to joining NerdWallet, he was the…

Siddhi Bagwe

Siddhi Bagwe is a content management specialist at NerdWallet Canada. Treating content marketing as an educational medium for readers, Siddhi believes in empowering them with the knowledge of personal finance…

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