Furthermore the job market also requires more training and education. More and more employers are hiring specialized personnel. According to some Canadian studies, 2 out of 3 jobs now require a post-secondary diploma. How can we hope to provide our children with the opportunity for a higher education?

Start investing
                                     in their future now!

Given the amount a post-secondary education costs, it’s better to start saving early. Regular contributions are also a great way to achieve your objectives. Regardless of the child’s age, it’s never too late to invest in their future.

A RESP will help you build a promising future far your loved ones today!

What is a
Registered Education Savings Plan?

A Registered Education Savings Plan, commonly referred as an RESP is the best financial vehicle to help you save for a child’s post-secondary education. Just like an RRSP the federal government allows you to accumulate investment income on a tax-sheltered basis until the funds are withdrawn from the plan. In short, RESPs are to education what RRSPs are to retirement!

Anyone who has an interest in a child’s future can subscribe to an individual RESP plan, whether it be the parents, grandparents, godfather, godmother, uncle, aunt, or even a friend. The plan subscriber, whether a resident of Canada or not, is the person who signs the contract and makes contributions to the plan.

Who can be designated
        as a beneficiary of an RESP?

A RESP is a very flexible plan. You can appoint anyone you wish as the plan beneficiary:

your child, grandchild, nephew, niece, etc. There are no restrictions on the beneficiary’s age or their relationship to you. As a subscriber you can appoint yourself as the beneficiary of your own plan, or even your spouse if one of you plans to further your academic training in the future.

A given child may be designated as the beneficiary of more than one RESP by different subscribers. For example, a parent and a grandparent can both subscribe to separate RESPs for the same child. They just have to comply with the maximum contribution limits allowed for one beneficiary.

Because RESPs are so flexible, you can also change the name of the beneficiary once the plan is in force.

How much
        can you save?

With a RESP, you are in control. You contribute to the plan at your own pace, with the ability to make contributions at any time, in lump-sum amounts (minimum: $100) or through regular payments of as little as $25 a month. There is no required minimum annual contribution. Note that the contributions made as a subscriber are not deductible from your taxable income, and therefore will not be taxable upon withdrawal.

To take advantage of tax preferred treatment provided by RESPs, the federal government has set an annual contribution limit of $4,000 for each beneficiary, up to a lifetime limit of $42,000. It is important to note that the contribution limits apply to the beneficiary, not the subscriber. This means that a parent and a grandparent, for example, can both subscribe to a separate RESP for the same beneficiary. By making sure they do not exceed the allowable maximum, they avoid any penalty tax.

Contributions can be made to the plan for 21 years from the effective date of the plan and the RESP must be fully liquidated no later than 25 years after it is set up.

Increase your savings with the
         Canada Education Savings Grant

In January 1998, the federal government created a Canada Education Savings (CES) Grant program. This program is primarily intended to encourage parents to save for their children’s post -secondary education.

This Grant provides an extra 20% on top of the annual contributions paid into the plan, up to $400 per year per beneficiary. There is a lifetime limit of $7,200 per beneficiary.

The Grant accumulates on a tax-sheltered basis in the RESP. The Grant becomes part of the educational assistance payments when the beneficiary pursues his/her post-secondary studies. Further, the contribution limit is not affected by the Grant.

How do I obtain
                                 the Grant?

The CES Grant is paid directly into the beneficiary’s education savings plan. We look after submitting the application for you.

In order to be eligible for the Grant, the designated beneficiary must have his/her own social insurance number, and must be a resident of Canada.

The Grant is available far children aged 17 and under. Far beneficiaries who are 16 or 17 there are conditions that must be satisfied for the Grant to be paid.

Why choose the RESP
                                   as an investment option?

The table below shows the advantage of choosing an RESP as an investment vehicle compared to a non-registered savings plan.

Example:

You want to invest for your two-year-old daughter Laurie’s post-secondary education. Thanks to the additional 20% in CES Grants generated on annual RESP contributions of $2,000 per year for 16 years, and the growth of tax-sheltered investments, you will accumulate a total of $78,600 in your RESP by the time she turns 18. The same amount invested in a non-registered plan (no CES Grant) is $45,395 considering a 50% taxation rate. The calculations are based on an 8% annual compound rate of return.

Is it possible to
                      carry over the CES Grant?

If no contributions are made for a given year, or if the contributions made are lower than the amount required for the maximum CES Grant ($400), the unused portion of the CES Grant is automatically carried over to subsequent years for as long as the beneficiary remains eligible. However, the total annual Grant may not exceed $800.

Example:

This year, you invest $1000 in Laurie’s RESP. A CES Grant of $200 i.e., 20% of your total contribution, is paid directly into the RESP. The Grant carry over is $200 (i.e. this year’s Grant entitlement of $400 less the $200 Grant received). Next year, the total Grant entitlement is $600 ($400 for the current years Grant entitlement plus $200 carry over from the previous year). Therefore, a $3,000 contribution will generate a $600 Grant payment into Laurie’s plan.

Investment vehicle
                                         of the future.
With a RESP you choose your investments. When you’re investing in something as important as your child’s education, the growth and security of your capital are essential to ensuring a promising future. With this in mind, our investment vehicles will meet your financial objectives based on your child’s age and your personal investment style.

When can I
               make withdrawals?

You have access to your money at all times. You can withdraw all or part of your contributions at any time, without ever having to pay income tax.

The investment income and CES Grant can be paid to the designated beneficiary when this person begins his/her post-secondary education. At this time, the subscriber chooses the amount and frequency of the payments to the beneficiary. The amounts, paid in the form of Educational Assistance Payments (EAPs), can be spread over several years of study and will be added to the beneficiary’s taxable annual income. Since students are generally low-income earners, the amount of income taxes will probably be fairly low. You can also add a portion of the contributions to the EAPs but this amount is not taxable for the beneficiary.

The amount accumulated in an RESP is intended to pay for tuition and any other related education expenses: accommodation, school supplies, food, transportation expenses, etc.

Subscribers control the RESPs. They can withdraw the capital investment at any time, with no tax penalty. However, if a Grant was received on the withdrawn amount, the corresponding Grant amount must be returned to the federal government, up to the amount of the Grant received (except when EAPs are paid to the beneficiary).

What happens if the beneficiary
                                           does not pursue a post-secondary education?

An Education RESP offers you several options if the beneficiary designated does not pursue a post-secondary education.

• Designate a new beneficiary

You may choose to designate a new beneficiary. New contributions may be made for the time remaining in the plan. However, to maintain the previous grants, the new beneficiary must meet one of the following conditions:

1. The new beneficiary must be under twenty-one years of age and is the former beneficiary’s brother or sister; or
2. Both beneficiaries (former and new) are related by blood or adoption to the subscriber – the old and the new beneficiary must be under twenty-one years of age.

• Transfer the accumulated investment income to your RESP

You can withdraw the capital portion from the plan tax-free. The investment income can be transferred to your RRSP or to a spousal RRSP (also tax-free), provided that you meet the following conditions:

1. You have unused RRSP contribution room;
2. You are a resident of Canada;
3. The RESP has existed for at least ten years;
4. The plan’s designated beneficiary is twenty-one or over and is not eligible to receive post-secondary Educational Assistance Payments (EAPs).

$50,000 is the maximum amount that can be transferred. Note that the CES Grant must be returned to the federal government.

• Withdraw the accumulated income

If your RRSP contribution room is not sufficient to accommodate the transfer of investment income from the RESP, you are required to withdraw this money no later than the end of February of the year following termination of the plan. This invested income will be reported as annual taxable income, and will also be subject to an additional penalty tax of 20%. You must respect the same conditions as those outlined in point 2 before you can withdraw the investment income accumulated in the RESP.