Managed Money Reporter Newsletter — Issue 125, June 1997

Editors: Carl Spiess & Allan McGlade

The "Easy Way" To Save For Your RRSP

By John Zufelt

The PAC Plan

The Pre-Authorized Cheque Plan or, PAC Plan for short, is the easiest way for most of us to ensure contributions are made to our RRSP accounts. PAC Plans also offer investment advantages that one-time contributions can not. The way they work is as follows; you first decide how much you would like to contribute to your RRSP for a one year period. Then, you sign an authorization form allowing the money to be deducted directly from your bank chequing account. You choose whether the money is taken on the 1st or the 15th of each month. For example, let's say you wish to contribute $3,600 per year into your RRSP. You would authorize $300 per month to be deposited automatically into your ScotiaMcLeod RRSP account from your bank chequing account.

Flexible Investment Choice

Once you have decided how much money to contribute and the date of payments, then you choose one or more investments to suit your growth and security goals. This is where many clients discuss their needs with one of our qualified staff and receive specific recommendations. By and large, mutual funds fit the bill because they allow for very low investment amounts (as low as $50/month), plus offer a wide scope of fund types such as T-Bill funds for risk adverse investors and specialty funds for those seeking maximum growth. Investments may be changed at any time and generally we recommend investing into a few good funds for the first year and then switch to other recommended funds to add diversification to your account. In our $300/month example above, an investor could choose four different funds, let's say a bond fund for $100, a Canadian blue chip stock fund for $100, a specialty fund for $50 and an international fund for $50 (maximum 20% foreign content).

Averaging In

An investment advantage of the PAC Plan purchase is called "averaging in", which means purchasing an investment on a regular frequency without regard to the emotional decision, "Is this the best time to buy?". Most people, given the choice, do buy at the wrong time such as after market increases rather than market declines. PAC Plans eliminate this problem. Let's see an example of an investor purchasing one fund for $100/month.

MonthShare PriceTotal SharesMarket Value

In this example, the share price declined in February to $9/share, but 11 shares were purchased at the lower price. In March when the share price rose again to $10, the whole account was worth $310 (verses the $300 invested) because more shares were purchased at a lower price. This is in contrast to the person who made a single investment of $300 in January and by March the account is still worth only $300.

The Saving Discipline

PAC Plans do help poor savers get money invested into their RRSP. Many people have great intentions of making an RRSP contribution every February and never make it. In this issue of the MFR we have included a brochure on PAC Plans and for further help, please call us at 863-7777 or 1-800-387-9273 or e-mail us at

Turn $82,662 into $425,000

Rates 100% Guaranteed by the Government

See your money grow!Now you can eliminate all worries about the stock market or where interest rates are going by buying Government Coupons (Strip Bonds) which are ideal for RSP's, RRIFs and Pension Rollovers. These coupons come in maturities from 1 to 30 years. You buy them at a discount to their maturity value (much like a treasury bill.) In the above example, each coupon costs only $194.50 and matures December 9, 2020 at $1000.00.

If your RSP buys 425 coupons for $82,662.50 they are government guaranteed to mature at $425,000 with no need to worry about CDIC insurance! We have thousands of other coupons available to meet your individual needs. Some Examples are:

(Subject to change)
Maturity ValueYield to MaturityMaturity Date
Ontario Hydro$749$1,0005.50%October 15, 2002
Edmonton$466$1,0006.80%November 16, 2008
Ontario$320$1,0007.03%December 2, 2013
British Columbia$194$1,0007.10%December 9, 2020

To demonstrate the effect of compounding, select various Strip Coupons that mature in different years:

Current Value of RSP/Current Price of CouponxValue of Coupon at Maturity=Your Retirement Nest Egg

Example from top of page: $82,662.50 divided by $194.50 times $1,000 equals $425,000.

FeaturesYou receive guaranteed reinvestment rate protection and compounding of your money. Unlike locked-in investments, Strip Coupons can be sold (subject to market conditions) before maturity.
SecurityBearer Coupons are a direct obligation of the Federal or Provincial Government and are free of credit risk regardless of quantity purchased (no $60,000 limit).
ActionCall us now at (416) 863-7777 or e-mail us at for a quote on our best rates, tailored to exactly match your retirement and investment goals. This is a free, no-obligation quotation.


If you find yourself with a RSP that you are dissatisfied with, it can easily be transferred to any of the best RRSP funds. If you would like further information on your current RSP or a second opinion on improving its performance, please call us at (416) 863-7777 or e-mail us at


Contact Us

T.  416.863.RRSP (7777)
F.  416.863.7479

ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.

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