The Government of Canada introduced the Canada Premium Bond in 1998. These secure investments are backed by the federal government and are offered for sale each year from early October to April 1.
Canada Premium Bonds offer a higher rate of interest than a Canada Savings Bond released on the same date. A Premium Bond has a maturity date of ten years, although the Minister of Finance announces and periodically changes interest rates depending on current market conditions.
Who Can Buy Canada Premium Bonds?
Investors must be Canadian residents to purchase Canada Premium Bonds. Each person may own up to $500,000 per series and type of registration. The Minister of Finance may order an investor to redeem any bonds in excess of the $500,000 limit. The Canadian Deposit Insurance Corporation does not insure bonds.
Across Canada, individuals can purchase bonds directly from the Government of Canada. In all provinces and territories except Quebec, two people may purchase a Canada Premium Bond together, provided they have right of survivorship (a term not applicable under Quebec law).
Which Type of Premium Bond Offers Higher Interest Rates?
Canada Premium Bonds come in two varieties, based on how interest accumulates. Regular interest, or "R" bonds, pay interest annually on either the anniversary of the date the bond was issued, or at bond redemption. Compound interest, or "C" bonds, automatically reinvest the accumulated interest annually, helping the investor grow their money faster.
*Note that only "C" bonds are eligible for inclusion in the Canada RSP and Canada RIF.
More on Canada Premium Bonds
Canada Premium Bonds cost as little as $100. Prices vary depending on the type of bond. "R" premium bonds are offered for $300, $500, $1000, $5000, or $10,000. "C" premium bonds are available for $100, $300, $500, $1000, $5000, and $10,000.
Investors can redeem Canada Premium Bonds each anniversary of the issue date, or in the 30 days after. No interest is paid for the period following the anniversary and within the 30-day period. Canada Premium Bonds within a Canada RIF are redeemable at any time without penalty.
Purchasing a Premium Bond or Other Secure Long Term Investments
See Canada Savings Bonds to learn how this closely related investment offers more flexible redemption terms. Before purchasing either a Canada Savings Bond or Canada Premium Bond online or by phone, read the federal government bonds Terms and Conditions carefully.
See the Quick Reference Guide to GICs for more information on guaranteed investment certificates, a secure investment insured by the Canadian Deposit Insurance Corporation. Or, read Fixed Income Investments to learn about mortgage-backed securities, provincial savings bonds, term deposits and other long-term investment vehicles.
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