Registered Education Savings Plans (RESP)

Registered Education Savings Plans are established to provide funds for the higher education of individualís children or grandchildren in most cases. RESPs are available through most financial planners, banks, trusts, credit unions, investment dealers, and insurance companies. They are also available through companies that offer scholarship plans.†

An RESP is specifically designed for saving for post-secondary education of a child or other beneficiary. The account can be opened for the beneficiary by a parent, grandparent, family member, and even friends.

Registered Education Savings Plans have two very attractive benefits. The first benefit is the tax efficiency of the plan. Unlike RRSPs, RESP contributions are not tax deductible, but they are sheltered from taxation once the funds are invested in the plan. Withdrawals are made in the name of the student who may have total income so low that there is no tax to pay.

RESP contributions may be eligible for the Canada Education Savings Grant (CESG) provided by the federal government to RESP account owners.† There are currently two Canada Education Savings Grants available.† There is a Basic CESG that provides all individuals with 20% on every dollar contributed to a RESP on the first $2,500 each year.† Depending on an individualís or familyís net family income, individuals may qualify for an additional 10% or 20% on every dollar of the first $500 deposited into a RESP each year.†

Features of RESPs:

  • No maximum yearly contribution.
  • Lifetime limit on RESP contributions is $50,000.
  • Maximum $500 CESG payment per year unless CESG room exists from previous year and then the maximum CESG payment is $1,000
  • Total lifetime CESG funds payable is a maximum of $7,200.
  • Contributions for an eligible beneficiary must have been made by December 31st of the year in which the beneficiary turns 17
  • Beneficiaries must be a resident of Canada at the time of the contribution and have a valid Social Insurance Number
  • Unused CESG-eligible contribution room may be carried forward into subsequent year
  • Contributions to RESPs are not tax deductible
  • Growth within the RESP plan is tax deferred
  • The growth portion of investments taxed in the hands of the student on withdrawal

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