Note: GIC rates shown are for non-redeemable GICs with annual compounding.
5-Year GIC Rate
as of June 2023
(+3% annual change)
5-Year Bond Rate
as of June 2023
(+21% annual change)
A 5-year GIC is a type of investment that allows you to earn a fixed rate of interest over a five-year period. Your money is invested for the entire 5-year term, and at the end of the 5-years, you will receive your original investment plus interest that has accrued. Your original investment is “guaranteed”, and your GIC might be eligible for CDIC or equivalent insurance. This means that your GIC provider promises that you won’t lose any money from your original principal. But it’s important to remember that this only applies to the original investment – any interest earned is not protected should your bank or GIC provider fail.
GICs can be either redeemable or non-redeemable. With a redeemable or cashable GIC, you can withdraw a portion or all of the money from your GIC without penalties. However, redeemable GICs have lower GIC interest rates compared to non-redeemable GICs. If you’re certain that you won’t need the money, locking in your funds with a non-redeemable GIC can reward you with a higher rate.
Most of the major banks and GIC providers offer 5-year GICs. Depending on the GIC, it can be held in registered and non-registered accounts. Registered accounts include RRSPs, TFSAs, RESPs, and other retirement savings accounts. These accounts may offer tax benefits.
The length of the term affects the interest rate. In general, the longer the term, the higher the interest rate. At most banks, the 5-year GIC is the longest term offered. This means that 5-year GICs often have the highest interest rate out of all other GIC term options. That’s because you’re locking in your funds for a long period of time. In the case of 5-year non-redeemable GICs, you also won’t be able to withdraw or cash-out your funds early.
Prior to 2020, the CDIC only insured GICs with a term length of 5 years or less. That changed in April 2020, when the CDIC changed their deposit insurance framework to allow GIC term lengths of over 5 years. Now, some banks and credit unions offer GICs with terms of up to 10 years!
The main difference between cashable and non-redeemable GICs is that cashable GICs can be cashed in without penalties, while non-redeemable GICs can’t be cashed-in at all. While your bank or GIC provider may offer exceptions to this, such as if you’re facing financial difficulties, it’s not guaranteed that you can get out of a non-redeemable GIC early. In exchange for this, cashable GICs have lower interest rates compared to non-redeemable GICs.
The interest rate offered can be significantly different. For example, BMO’s 1-year cashable GIC offered a rate of 3.00% as of August 2023, while BMO’s 1-year non-redeemable GIC offered a rate of 5.10%. That’s almost double the interest rate for non-redeemable!
Another example is RBC’s 1-year cashable GIC, at 2.25%, compared to RBC’s 1-year non-redeemable GIC at 4.05%. That’s close to double the interest just by going with a non-redeemable GIC.
None of Canada’s major banks offer cashable GICs for a 5-year term. Instead, most cashable GICs have a term length of 1 year. If you’re looking for a term length of 5 years, most GICs that you encounter will be non-redeemable. However, there are still some options to have flexibility for your investment. Some banks allow your GIC to be transferred, which may allow you to cash-out early. Others feature GIC laddering, which may allow you to cash-out up to 20% of your investment once per year. Be sure to check what features and unique GIC products your bank offers.