Registered Education Savings Plan (RESP)
What is an RESP?
An RESP (Registered Education Savings Plan) is an investment plan that helps parents, family and friends save for a child’s post-secondary education. Savings grow tax-free and there are government grants that can help with your contributions.
Did you know?
Young people with education savings are 50% more likely to pursue post-secondary education. Open an RESP and give them a head start on success!
Benefits of an RESP
Save more, faster, with up to $7,200 in matching contributions from government grants. Plus, it doesn’t count toward your contribution room.
You don’t pay tax on any investment income. Also, since withdrawals are taxed in the hands of the student, who’s typically in the lowest tax bracket, this usually means little or no tax will be paid.
Start sooner to save more - all you need is your child’s Social insurance Number (SIN). You can also change beneficiaries if one child decides not to continue their education.
Open an RESP
To get your education savings started, contact your local Meridian branch and book an appointment to talk to an advisor.
For your appointment, remember to bring:
- Your social insurance card
- Your child's social insurance card
- Your child's birth certificate or permanent resident card
If you are not the parent or legal guardian of a child, but would like to open an RESP for them, you can get more information on what documents you'll need to bring with you by calling your local Meridian branch.
The lifetime maximum is $50,000 per beneficiary
Who can contribute
Anyone can contribute to an RESP
How long you can contribute
You can contribute for up to 31 years after you open an RESP
The specific grants and programs you qualify for depends on where you live, your family income, how much you contribute, and how early you started the RESP. Here are two federal programs you should check out:
Canada Education Savings Grant (CESG)
With the CESG, the government contributes to your RESP by matching 20% on a maximum of $2,500 in annual contributions until the beneficiary turns 17. This gives you up to $500 per year in free money. The lifetime CESG maximum is $7,200 per beneficiary. Families with lower incomes may be eligible for additional contributions. CESG rules also allow you to carry forward unused contribution room to later years.
Canada Learning Bond (CLB)
The CLB provides up to an additional $2000 in grant money per beneficiary over the life of an RESP. To qualify, the beneficiary must be born on or after January 1, 2004, and the family’s net income must meet certain requirements. Eligible beneficiaries receive an initial grant of $500 and later grants of $100 in each year that they are eligible. An RESP must be opened to receive the CLB; however, you don’t have to make any contributions to the RESP to receive CLB grant money.
You can request RESP payments to cover expenses for the account’s beneficiary once he or she starts a post-secondary education. These expenses can include things like tuition, textbooks, room and board.
- Only the person who set up the account and made contributions, known as the subscriber, can make withdrawals – not the beneficiary.
- In order to make a withdrawal you must provide proof that the beneficiary has enrolled at a post-secondary institution.
- There are 2 types of withdrawals – withdrawals of contributions from the subscriber, called Post-Secondary Education Payments (PSE), and withdrawals of government grants, known as Education Assistance Payments (EAP).
- EAP withdrawals can only be sent to the beneficiary.
- There’s no maximum for the amount you can withdraw from PSE contributions.
- For EAP contributions, you can withdraw a maximum of $8000 during the first 13 weeks of schooling for full-time studies and $4,000 for part-time studies.
Taxes on withdrawals
- PSE withdrawals aren’t taxable.
- The student will be taxed on EAP withdrawals. Your financial institution issues a T4A tax form in the student’s name for EAP payments.
The subscriber (the person who opened the plan) owns the funds within the RESP. An RESP can be opened by an individual or joint subscribers who are spouses.
If you open up a Family Plan RESP, you can have more than one beneficiary.
The majority of Canadian post-secondary institutions and programs qualify for receiving RESP payments. Some post-secondary institutions outside Canada may also qualify.
You must use or terminate an RESP within 35 years of opening it.
If the beneficiary chooses not to pursue post-secondary education, one of three things must happen:
- You change the plan's beneficiary (e.g. to a sibling)*
- You transfer funds to another RESP*
- You close out the plan completely*
If you choose to close the plan you will have to return any government grant money. Since the RESP contributions belong to the subscriber, these can be withdrawn from the RESP without penalty.
*Some restrictions and/or penalties may apply.