Understanding Canada Savings Bonds

For more than 70 years, Canada Savings Bonds (CSBs) were a safe investment vehicle that provided Canadians with a guaranteed rate of return — and the government with funds for capital projects. Although CSBs are no longer available, here’s a look at how they work, how you can redeem a CSB if you have one, and similar alternatives on the market.

What are Canada Savings Bonds and Canada Premium Bonds?

First offered after the Second World War, CSBs were sold by the Government of Canada as a means of federal funding as well as a savings vehicle for Canadian investors that provided a minimum guaranteed interest rate.

Canada Premium Bonds (CPBs) were introduced in 1998 and worked similarly to the CSB but offered a higher interest rate.

» Understand the basics: What are interest rates, and how do they work?

How did they work?

Both CSBs and CPBs were sold at specific times of the year (most recently, in the fall). Initially offered with 10-year terms to maturity, interest rates were guaranteed not to change during the first year and then set by the Minister of Finance for future years, based on market conditions.

The government shortened the 10-year term to a three-year term to maturity in 2012 as a way to make savings bonds comparable with other similar retail products.

CSBs were non-transferable and issued in two forms:

Regular Interest “R” Bonds, where interest accrued monthly and was payable annually into the holder’s bank account. The minimum denomination of these bonds was $300.
Compound Interest “C” Bonds, where interest was compounded annually and paid when the holder redeemed the bonds. The minimum denomination of these bonds was $100.

CSBs were redeemable at any time and could be held within a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund (RRIF). CPBs offered a higher interest rate, as they were only cashable once a year on their anniversary and for 30 days afterwards (until 2012, when they became cashable at any time).

Participating employers also offered a CSB Payroll Savings Plan, enabling employees to purchase CSBs via regular deductions from their pay, either for themselves, jointly owned or for a third-party, such as a minor child. From 2012 onwards, the government made CSBs exclusively available to employees enrolled in the payroll program, while CPBs continued to be available through financial institutions and investment dealers.

Can you still buy Canada Savings Bonds?

No. In the 2017 budget, the federal government announced it was discontinuing the sale of CSBs and CPBs that year, due to a decline in sales, consumers’ access to other investment vehicles and escalating costs to manage the program.

Indeed, the federal government says the CSB program reached its peak in 1987-’88, representing nearly $55 billion in total retail debt outstanding. CSBs offered an annual interest rate of 19.5% in 1981, compared to a return of 0.5% in 2020.

» MORE: Discover how Canada Learning Bonds are different

How to redeem Canada Savings Bonds

With the program ending, all outstanding CSBs and CPBs reached maturity and stopped earning interest in December 2021 — while they will continue to be honoured, it’s time to redeem.

If you have a certificated (physical) bond, take it to your bank branch. They will ask you to sign the back of the bond upon presentation and will pay the face value, plus any accumulated interest, in cash or as a deposit into your bank account.

If you’ve lost your certificate, follow the government’s lost bond process to redeem, which includes completing and signing a Bond of Indemnity form and paying surety fees.

If you hold a CSB within an RRIF or RRSP, visit your bank to discuss transferring the funds to another registered retirement vehicle, or contact the Canada Savings Bonds customer service centre if you’d prefer to withdraw.

All bonds in the CSB Payroll Savings Plan reached maturity in November 2021 and were automatically paid out by the government. Payroll Savings Plan members can access the Federal government’s CSB Online portal for information about the next steps.

Alternatives to savings bonds

For savers looking for banking products or fixed-income investments that operate in a similar way to savings bonds — i.e., with guaranteed rates of return — alternatives are available.

Guaranteed Investment Certificates (GICs)

A GIC is a financial product that also provides a fixed interest rate and a guaranteed return at the end of a specified period. The interest rate generally increases depending on how long you agree to leave your money in the GIC. For example, while a one-year GIC might yield 0.45%, a five-year GIC guarantees you 1.45%.

Treasury bills

Treasury bills, or T-bills, are offered by provincial and federal governments that need to raise capital and are sold by most financial institutions and investment firms. T-bills can be sold at any time and the interest rate is guaranteed but typically low.

High-interest savings accounts

A high-interest savings account (HISA) will often provide a better interest rate than regular savings accounts — sometimes over 1% — but the interest earned is taxed. Minimum balance requirements or monthly fees for HISAs vary by bank. Another option is a high-interest Tax-Free Savings Account (TFSA), a registered plan that pays a similar rate but allows your money to grow tax-free.

» From high-interest TFSAs to online-only options: See our picks for the best savings accounts in Canada

These alternatives to CSBs are also secure — up to $100,000 held in GICs or savings and chequing accounts at registered Canadian financial institutions are protected by the Canada Deposit Insurance Corporation.

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