Reimbursing labour-sponsored fund RRSP used for HBP in another institution

So I’ve been stuck with a labour-sponsored fund (Fondaction) RRSP for a few years and there are next to no option to transfer the money out from it.
I was thinking, since I’ll be withdrawing the money from Fondaction using the Home Buyer’s Plan in the next 18 months, I could reimburse my contributions to another institution over time (Wealthsimple). That would allow me to take full control of my retirement money.
However, I would have to reimburse the tax credit I already received (~30%) since the money wouldn’t be in the fund anymore.

Here’s my reasoning:
I have ~21k$ in Fondaction, including 6k$ received in tax credit.
Giving it all back would bring me down to 15k$.
Fondaction’s management fees are 2,05%. Wealthsimple is free.

I ran a quick calculation to check how long it would take for 15k$ to outperform 21k$ at with a hypothetical 7% return (minus the 2% fees for Fondaction, therefore 5%) and no additional contribution.

It would take 18 years. It’s certainly not as simple as that, but I’m wondering if it’s really worth it. It would be a pain to give 6k$ back in taxes, knowing I could invest it or use it to pay my mortgage.

What do you think?

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Asked on August 18, 2023 1:56 pm

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Yeah, these types of funds are kind of structured in a way that it's very hard to get around them. I know management fees are a pain in the rear, but paying 30% of the money to refund a tax credit, as you've calculated, is much worse.

I'd say the only situation here where it would be a net benefit would be if the fund was really lacking in terms of returns. lets say it's returning 4% and you feel you could do 7-8% in your own hands.

Other than that, an 18 year turnaround for the fees to nullify is a pretty long time.

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Posted by Dan Kent

Answered on August 21, 2023 7:44 am

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