Why a Registered Education Savings Plan (RESP)?
Since 1990–1991, the average tuition (plus other compulsory fees) in Canada will have grown from $1,464 to an estimated $7,755 in 2017–2018, including a 13-percent jump from 2014–2015.1, 2 If the average annual increases continue in this pattern, children born in 2015 may be looking at over $60,000 in tuition and compulsory fees alone for a four-year undergrad degree.2 And these numbers are only part of the overall equation once accommodations and other living expenses are factored in, driving home the significance of establishing an efficient savings plan.
At the highest level, RESPs are tax-deferred plans specifically designed to help families reach education savings goals, offering a combination of flexibility, investment growth potential, and government support.
Types of plans
- Family plan: This type of plan allows for more than one beneficiary. Each beneficiary must be connected by a blood relationship or adoption to each living subscriber or to a deceased original subscriber.
- Individual plan: This type of plan allows for one beneficiary. The beneficiary can be the subscriber and may or may not be related to the subscriber.
(Note: Not all institutions offer both types of plans.)
Who can be a subscriber?
Parents and grandparents are the most common subscribers to RESPs. Subscribers must be related by blood or adoption to the beneficiary(ies) for a family plan.
Who can be a beneficiary?
Any resident of Canada who has a Social Insurance Number (SIN).
Key details
- There is a $50,000 lifetime contribution limit per RESP beneficiary. There is no annual limit, although only a portion of the contribution may be eligible to receive the Canada Educations Savings Grant (CESG).
- Contributions are not tax-deductible and can be withdrawn tax-free.
- Income, gains, and government incentives, including the CESG, Canada Learning Bonds (CLB), and some provincial incentive plans accumulate on a tax‑deferred basis.
- The RESP has to be wound down by the end of the calendar year that includes the 35th anniversary of the plan opening date (40th year for a plan with a disabled beneficiary).
- There are flexible investment options within the plan; investments that are eligible for an RRSP are also eligible for an RESP.
Further information and details are available on the CRA website.
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