Canada Savings Bonds could become extinct

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Bill Morneau, the Federal Finance Minister, said the government is evaluating the CSB program along with other programs to make sure they still deliver the intended objectives.
Bill Morneau, the Federal Finance Minister, said the government is evaluating the CSB program along with other programs to make sure they still deliver the intended objectives.

In 2015 the accounting firm KPMG submitted a report to the Department of Finance. The report said there was “no valid economic rationale” for the Canada Savings Bonds (CSBs)program.

The value of CSBs in 1987 was $55 billion. In 2015 that value had fallen to approximately $6 billion.

Based on such a significant decline of CSBs in Canada it would appear the government should end the program. The difficulty with making that decision is 2.5 million Canadians still continue to invest in them.

CSBs have been part of the Canadian investing landscape for 70 years. The government promoted them as being safe investments that could be cashed in at any time.

Like most investment products there has been increased competition by other investment options that offer the same attributes. The safety of these alternative investments is enhanced through the Canada Deposit Insurance Corporation (CDIC) that provide a government-backed guarantee.

Bill Morneau, the Federal Finance Minister, said the government is evaluating the CSB program along with other programs to make sure they still deliver the intended objectives. Monroe is asking for feedback from Canadians.

This public conversation about the future of CSBs started with the recent CBC report that speculated CSBs might be phased out in next year’s federal budget.

Eliminating such a long-standing government-sponsored savings program will be a difficult decision. Plus, there is the political risk of alienating those that enjoy the process of investing in CSBs.

My vote would be to eliminate CSBs. It does not make sense for our government to duplicate things that are also provided by the public sector.

As stated above there are other ways that similar investment products can be purchased. These alternatives are safe, can be offered with a government-backed guarantee, and can be purchased on a regular basis, including through a payroll deduction plan.

All Canadians have access to similar investment vehicles. Plus, the government has many other more efficient ways to raise capital.

In summary there is no logical reason for the federal government to continue to offer Canada Savings Bonds.

The role of government is to provide leadership and to fill the need of things that are not available to assist all citizens. Like any organization the government must cut programs that no longer offer real value.

That pruning of current programs provides room to spend our government’s time, energy, and money on services that can truly make a difference.

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