Canadian RESP Information

The Canadian RESP (Registered Education Savings Plan) is a savings plan that is registered by the Government of Canada to allow savings for a child's education to grows tax-free until the child is ready for his/her post-secondary education. Unlike RRSPs (Registered Retirement Savings Plans), the contribution for RESP Canada is not tax deductible.

New RESP Rules 2007

The 2007 Federal Budget made the followind changes regarding Canada RESP:

The $4,000 limit on annual RESP contributions was eliminited;
The lifetime RESP contribution limit was increased to $50,000 from $42,000;
The maximum annual amount of Basic CESG that can be paid in any year was increased to $500 from $400 (and to $1,000 from $800 if there is unused grant room from previous years). The lifetime CESG for each child is still $7,200.
The students can access up to $2,500 of their income and grants for each 13-week semester of study.

The new RESP rules will benefit those families enormously who can make a lump some Canada RESP contribution up to $50,000 per child when their children are still young. Please talk to a RESP representative to see how you can benefit most from the new Canada RESP rules.

What are Canada Education Savings Grants (CESG) ?

First introduced in 1998 and then enhanced in 2004, Canada Education Savings Grant is an education grant from the Federal Government of Canada that contributes to the RESP account of a child. CESG is composed of two portions: Basic CESG & Enhanced CESG.

20% Basic CESG: for every $100 contributed to an RESP by you, the government provides a $20 grant called the Canada Education Savings Grant. The CESG can be as much as $500 a year for each child.

Enhanced CESG: starting from 2005, for the first $500 contributed by you each year, the Canadian Government will provide an additional 20% of enhanced CESG to your kid's RESP plan if your family income is below $36,378 (the amount is updated by Human Resources and Social Development Canada each year based on the rate of inflation); and 10% additional Enhanced CESG is added to the RESP plan if your family income is between $36,378 and $72,756.

With the enhanced CESG, the Canada Education Savings Grant could be $600 each year for low income families. The lifetime maximum of all Canada Education Savings Grant is $7,200 per child.

What is Canada Learning Bond (CLB)?

Canada Leaning Bond was introduced in the Budget 2004 of the Government of Canada which will provide up to $2,000 for children born after 2003 in families entitled to the National Child Benefit supplement (NCBS).

Starting from January 1, 2004, a new born baby who qualifies for the National Child Benefit supplement will get $500 in the form of Canada Learning Bond from the Government of Canada when first opening a RESP account. An additional $100 will be contributed into the CLB account each subsequent year until the child reaches 15 for a total of $2000, as long as the child remains eligible for the NCBS.

In addition, $25 will be provided by the Canadian Government along with the initial $500 bond to help covering the cost of opening a RESP account.

What is the Alberta Centennial Education Savings Plan (ACES) Grant?

The ACES grant is established by the Alberta Provincial Government which will pay $500 into the RESP account of a child who was born in Alberta on January 1, 2005 or later. Additional ACES grants of $100 will be paid into the RESP account of a child when he/she turns 8, 11 and 14 provided that the child, at the time, enrolled in a school in the province of Alberta and the minimum RESP contribution level has been met.

Major RESP Distributors

Some of the major RESP dealers/distributors/promoters/providers are:

Almost all major financial institutions including banks, trust companies, credit unions, mutual found companies & investment dealers offer "self-directed" Non-Family and Family RESP.
Heritage Education Funds Inc.
USC Education Savings Plans Inc.
Canadian Scholarship Trust Foundation (CST)
Global Educational Trust foundation
Childrens Education Trust

A list of RESP representatives serving the Great Vancouver area/low mainland and the rest of the province of British Columbia of Canada can be found at Canada RESP Representatives.

Canadian RESP Regulations / Rules

RESP Canada is mainly regulated by the Income Tax Act, sections 146.1, 118.6 and 204. Some of the regulations are briefly listed below (please refer the Income Tax Act or a particular provider's Prospectus for a complete description):

Beneficiaries: the Social Insurance Number of the child named in the plan as the beneficiary must be provided. A child may have more than one plan.
RESP Contribution Limit: the lifetime contribution limit for each child is $50,000 and there is no more annual contribution limit. Previously the annual contribution limit is $4,000 with a lifetime contribution limit of $42,000.
Mandatory Termination: a Canada Education Grant Savings plan for a child must be collapsed at the end of the 25th year following the year in which the plan is established.
Accumulated Income Payments (AIPs): the income earned on an RESP account may be withdrawn by the contributor in the form of Accumulated Income Payments under certain conditions. The AIPs can be transferred to the contributor's RRSP without incur tax penalty to the extent of any unused RRSP contribution room to a maximum of $50,000.
Educational Assistance Payments (EAPs):

The Million Dollar Secret

Post-secondary education is very important for the kids. According to the Association of Universities and Colleges of Canada: "over their lifetime, university graduates on average earn $1 million more than do those without a postsecondary education". The chance to become a million dollars richer with post-secondary education is much better than winning lotteries.

Many people spend hundreds of dollars each year on lotteries hoping to win a few million dollars of lottery money and yet only a few of the lucky ones will become instant millionaire. Compared with Lotto 649 or other lotteries, post-secondary education maybe the most sure way to win a million dollars more for your kids.

Loving parents and grandma or grandpa: save one loonie or one toonie a day in the form of RESP (Canada) will lay a sound ground financially for your kids'or grandson's or grandaughter's post-secondary education and make them one million dollars richer.