RESPS

Registered Education Savings Plans are set up through the federal government to help you save for your child’s education. By putting money away each year, you ensure that your child will have money available for post-secondary school.
    

FEATURES:

  • Choose from 2 plan types: individual and family
    • Individual Plan – only one beneficiary – no relationship requirement with subscriber(s)
    • Family Plan – one or more beneficiaries – each beneficiary must be connected to each subscriber by blood relationship (as defined in the Income Tax Act) or adoption.
  • Lifetime contributions to all RESPs per beneficiary to a maximum of $50,000
  • Earnings are tax sheltered until withdrawn
  • RESP investors receive an additional Canada Education Savings Grant of 20% from the government on the first $2,000 of an annual investment
    • Annual and lifetime RESP contribution limits are not affected by grant payments

Canada Education Savings Grant

The biggest incentive to buy RESPs is the Canada Education Savings Grant. RESP investors receive an additional grant of 20% from the government on the first $2,000 of an annual investment. This means that the RESP can collect an extra $400 a year towards the child’s education. This can mean a possible lifetime difference of up to $7,200.

 

The earlier you start putting money toward a child’s RESP, the more he or she will benefit from the annual grants and tax-free interest. It is important to note that there are situations where the grant would have to be repaid.

 
More details on RESPs

Beneficiary

  • Individuals must have a Social Insurance Number and be a Canadian resident.
  • In an Individual Plan, can be anyone, including the subscriber.
  • In a Family Plan, each beneficiary must be connected to each subscriber by blood relationship or adoption and must be under 21 when the plan is entered into.
  • Only certain beneficiaries are eligible to replace another beneficiary in a Family Plan. The same rules apply to the Individual Plan in order to avoid tax and CESG implications.

Subscriber

  • Can be joint with spouse/common-law partner.
  • Must have a Social Insurance Number.
  • In an Individual Plan, can be anyone, including the beneficiary.
  • In a Family Plan, each subscriber must be connected to each beneficiary by blood relationship or adoption.

Contributions

  • Lifetime maximum contributions to all RESPs per beneficiary is $50,000 (excess contributions are not permitted and subject to a 1% penalty).
  • Contributions are not tax deductible however earnings are tax sheltered until withdrawn.
  • Excess contributions which did not attract CESG in the year cannot be carried forward to attract CESG in a subsequent year.

Eligibility for Grant

  • Contributions must be made prior to the end of the year the beneficiary attains age 17.
  • The beneficiary must be a resident of Canada and have a Social Insurance Number.
  • RESP beneficiaries age 16 or 17 years are eligible only if:
    • a minimum of $2,000 RESP contributions have been made and not withdrawn for that beneficiary before the end of the year the beneficiary attains 15 years of age 
    • a minimum of $100 in annual contributions have been made and not withdrawn for that beneficiary in any 4 years before the end of the year the beneficiary attains 15 years of age  

It is important to note that there are situations where the grant would have to be repaid. Contact your credit union for full details.

Educational Assistance Payments (EAP)

  • It is intended that all earnings in the RESP, as well as the CESG received, will be used for education related costs at a qualifying post-secondary educational institution.
  • Earnings are sheltered from tax while in the RESP plan. Both earnings and CESG will be taxable when withdrawn by the Beneficiary.
  • Withdrawal requests for EAPs must be accompanied by proof of enrolment in an approved education program.
  • EAPs are limited to $5,000 in the first 13 consecutive weeks in a qualifying educational program.

Investment Options

  • New Plan - No minimum deposit
  • Subsequent Lump Sum Deposits:
    • Term $100
    • Variable rate - no minimum deposit (for bi-weekly or montly electronic deposits, the minimum is $25) Fixed.
  • Quarterly statements
 

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