Banks Show No Respect for Retirees or Retirement Income

Considering that we are in midst of a time when most of the Baby boom generation are either retired or close to retirement, it boggles the mind as to how little understanding Canadian banks have regarding retirees who no longer have employment income. 

Case in point, my husband Rich has been trying since the beginning of January to apply for a CIBC No Fee Dividend Cash-back VISA and has been jumping through hoops in trying to prove that he makes enough income to qualify.  This is despite the fact that he already has excellent credit history and a fee-based BMO World Elite Mastercard for which he is repeatedly offered higher credit limits.  As an aside, new immigrants without jobs and students just out of school seem to have less issues with getting credit cards.

Even though Rich clearly stated on the application form that we are retired (and have been for over 10 years now), the agents that he spoke to via email, chat and phone all insisted that he send proof of employment income by showing the EFT payment of his last pay cheque.  He repeatedly informed them that he has no employment income and no pension.  All his income comes from annual RRIF withdrawals as indicated by T4RIF statements, dividend income from our joint non-registered account (T5 statements) and interest from his high interest bank account with EQ Bank (T5 statement).  Yet even after sending in images of all these tax statements from 2021 (the most recent available at the time), he was still sent emails demanding proof of EFT transfers and told that his application would not be processed without this.

After spending what felt like an eternity on the phone speaking to multiple CIBC agents, he finally (or so we thought) got them to understand that he had no employment income, no pension, but he did have investment income.  He was next informed that the 2021 tax statements were not recent enough.  The last agent idiotically asked for 2023 T4/T5 statements!  Clearly this person does not live in or pay tax in Canada, or she would understand that this is not how Canadian tax system works. 

This process took so long that Rich received his 2022 T4RIF and T5 statements and could send those in to show more current income.  But he needed a secure portal to send in these sensitive documents.  He was asked to use the portal that was open for him back on January 18, 2023.   That email is long gone but consider this -- How secure is a portal that stays open forever?!?  Asking for a new secure portal to be sent to him proved to be the next challenge.  After waiting over a week and not receiving one, Rich decided to make an appointment with a live agent at our local branch so that he could show all his documentation personally and explain the situation.

On the day of his appointment, the email with the secure portal finally came and this is what the email said:

It is like the previous 5 agents that Rich spoke to totally ignored the conversations and just could not grasp the concept of someone not having employment income.   Are we not now at the tail end of the baby boom and have there not been masses of retirees to deal with over the past 30 years?!?  Even if this was a form letter, where is the option for retirement income (be it pension, investment or other)?

Ignoring this last frustrating email, Rich proceeded to the meeting with the bank representative at our local branch.  This time he went in armed with his tax notices of assessments from 2020, 2021 and his T4/T5 slips from 2022, all showing that he had more than sufficient income to qualify for this credit card.  After another hour of questions, a credit check (which presumably was already done before) and viewing of driver’s license and other credit cards, the agent was finally able to approve Rich’s credit card there on the spot.

If you think this is just an issue with CIBC, we have found that this culture of disrespect for retirement income is consistent through all the banks.  A year after we first retired, we thought it would be smart to have a small line of credit for emergencies, although we never intended to use it.  When we applied for the line of credit with one of the other big banks, we were told that our investment income (which consists of mostly dividend payments from blue chip stock) is not reliable since at any time, we could sell our stock and lose that income.  In contrast, this was compared to a steady employment pay cheque, yet there was no consideration that one could lose or quit their job and therefore lose that income.

Rich also ran into trouble when he initially applied for the BMO World Elite credit card. Once again, our investment income was discounted, and he was looked down on for not having employment income.  It was not until we sat with the bank manager and showed financial statements reflecting our investment portfolio that he was finally granted this initial card.  At the time, we thought it was because he did not have much credit history, but this is no longer the case.  Rich now has over 3 years of stellar credit history and should have an excellent credit score since he has never missed paying his balance in full.

There are a few lessons learned for retirees or soon-to-be retirees.

1. Forego the “convenience” of an online credit card application and head straight to the bank to begin with.  You will save many agonizing hours on the phone speaking to agents who just don’t get it

2. If you can, get all your credit cards, line of credits, loans, etc. locked down before you retire, while you still have employment income

3. Banks need to change their antiquated processes that are totally focused on the employed.  There is a large contingent of responsible, financially secure retirees that are being shafted by this mindset.

Handling US dollar income and capital loss on Canadian tax returns

This year, just before we were about to file our 2022 tax returns, Rich received a notice of reassessment for his 2021 tax return.  It indicated that he missed declaring some income and as a result, would need to pay an extra amount in tax, as well as a small interest charge. The issue turned out to be on the T5 form for our dividend stock that paid in US funds.

In 2021, we had two stocks in our non-registered account that paid in US funds.  The first is Algonquin Powers (AQN.T) which is a Canadian stock that qualifies for the dividend tax credit but pays dividends in US funds.  These dividends were shown at the top of the T5 form in boxes 24-26 and were declared properly.  We also owned AT&T which is a US stock and its dividends appeared at the bottom of the T5 in boxes T15 and 16.  In a careless clerical error, I totally missed these lower boxes while preparing our tax returns.  Both of our tax returns should have been reassessed since we split our non-registered income 50/50.  But for expedience, CRA attributed all of the missing income to Rich, since his name was listed first on the Joint T5 form and my name came after.

That was just the start of the issues.  The amounts of dividend shown on the T5 were in US dollars but on the tax return, we were required to declare in Canadian dollars.  Some currency conversion was required, but at what rate?  The agent we spoke to on the CRA help line informed us that we needed to use the Bank of Canada annual exchange rate for 2021, which can be found here:   https://www.bankofcanada.ca/rates/exchange/annual-average-exchange-rates For 2021, the rate was 1.2535.

The day after we spoke to this agent, I realized that on our 2021 returns, I also neglected to submit the T5008 form that listed our capital loss when we sold AT&T in Dec 2021.  Without a record of this form on our 2021 tax return, we would not be able to claim the loss against any future capital gains.  I did not realize this at the time, and since there was no income to declare, I hadn't included it.

I was back on the phone with the CRA info line to find out what was the best course of action to retroactively add this.  Before talking to an agent, I did my own investigations and came up with two possible solutions.  I could try to do a REFILE on my 2021 tax return to add the details of the T5008 form.  This would be a viable solution if I had not also been reassessed (I got a small additional refund, which I accepted without question).  If I did a REFILE, I would be resubmitting my “pre-reassessment” form which would be out of date.

The second alternative was to log onto my CRA Account to select the “Change My Return” option.  I would not be able to enter all of the fields from the T5008, but this seemed to be OK since CRA already had this form on file.  Instead I would update Schedule 3, line 13200 and enter the amount of loss that we incurred when we sold the AT&T stock.  But once again, the amount was in US dollars so it was not as simple as taking the Book value and subtracting it from the Disposition proceeds.  Once again, I had to convert to Canadian dollars.  But this time, I needed the Bank of Canada historic noon rate for the date of the sale, which in this case was December 8, 2021.  Now I had to go to this link to get the right exchange rate:  https://www.bankofcanada.ca/rates/exchange/daily-exchange-rates-lookup  I multiplied our loss by the stated exchange rate and submitted this new value in line 13200.  I got a rapid reassessment that indicated my loss was now on record and I could claim 50% of it against my next capital gain.  Note that I applied all the loss to myself rather than giving half to Rich.  That was more complexity than I wanted to deal with and since CRA did the same with Rich's reassessment, I figured this would be OK.  I was just happy that we didn’t lose the right to use our capital loss in the future.

So, this tax reassessment led to several lessons learned.  Ironically, we learned these lessons too late to be of use to us, as we have since sold both AT&T and AQN from our non-registered accounts and currently no longer have US dividends as income from that account.  But in sharing our lessons learned, hopefully others will not make the same mistakes that I did.