What is a Registered Education Savings Plan (RESP)?

A Registered Education Savings Plan (RESP) is an account used to save for post-secondary education. The Government of Canada also offers incentives to maximize savings for post-secondary education. The recipient of the grants offered is referred to as the “beneficiary”.

Types of RESP Accounts

There are 3 types of RESP accounts that you can open:

1. Individual: This plan is limited to a single beneficiary. The account can be opened by anyone related to the beneficiary or not.
   
   
2. Family: This plan is for one or multiple beneficiaries who are related to the primary account holder. Beneficiaries can be added in the lifetime of the account.
   
   • Family RESPs can only:
     • Be opened by parents, grandparents, or siblings
     • Have siblings as beneficiaries
       
       
3. Adult: For anyone opening an account for themselves as long as they are 18 and older. However, adults are not eligible for the Basic Canada Education Savings Grants (CESG).

RESP plans can be opened with a co-subscriber who must be the spouse or common-law partner of the primary account holder.  To learn more, you can go to the Government of Canada page.

Benefits of Investing in a RESP Account

There is no annual contribution limit to a RESP account, although there is a lifetime contribution limit of CAD $50,000 per beneficiary across all actively open accounts.

Contributions to RESP accounts can be made for up to 31 years, and the plan can remain open for a maximum of 36 years. 

The Government of Canada offers the following grants:

1. CESG: No matter what your family income is, ESDC pays an amount of Canada Education Savings Grant (basic CESG) of 20% of annual personal contributions you make to all eligible RESPs for a qualifying beneficiary to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.
2. Additional CESG: This is an additional grant that is offered based on the adjusted net family income of the beneficiary.
3. Canada Learning Bond (CLB): This is an additional grant that is available to beneficiaries from low-income families born in 2004 or later. The Government provides an initial $500 for the first year the child is eligible, plus $100 for each additional year of eligibility, up to age 15, for a maximum of $2,000.

Please note that:

1. Making a deposit is not required to receive the CLB; and, does not guarantee that we will receive a grant, as grants are applied for per beneficiary.
2. Typically, eligible grants can take between 1-2 months to process.
3. The provinces of Quebec and British Columbia offer an additional grant for beneficiaries who are residents of that province with a Custodial Parent/Legal Guardian who is also a resident of the same province at the time of application. Please contact our support team for more information about applying for these provincial grants.

You can learn more about RESPs and related benefits here.

Limitations of Investing in a RESP Account

If the account holder exceeds the maximum lifetime contribution room of CAD $50,000, all excess contributions over CAD $50,000 are subject to a 1% monthly charge until they are withdrawn.

If the account holder makes an early withdrawal, the funds are subject to a 20% penalty fee and income tax if there were any earnings while the funds were invested.

If the account funds are not utilized within the 36 years since the account was created, the Government will receive its portion of annual contributions back and can tax any gains.