Registered Education Savings Plan (RESP)


Q. What is an RESP?

A. An RESP is a tax-deferred education savings vehicle through which the federal government allows a subscriber to save money for a beneficiary’s post-secondary education.

Q. What kind of plans are available under RESP?

A. Two types of plans are available; Individual and Family plans.

An individual plan is an RESP set up by a subscriber for one beneficiary. A subscriber may designate any one as the beneficiary of the plan. There is no age restriction of the beneficiary of an individual plan. The individual plan is the only plan available that allows the beneficiary to be unrelated by blood or adoption and any beneficiary over 21.

A family plan is an RESP set up by a subscriber for one or more beneficiaries. Each beneficiary must be under 21 years of the age at the time of designation and must be related to the subscriber by blood or adoption. Subscribers may not designate themselves or a spouse or a common-law partner as a beneficiary under a family plan.

Q. What is the benefit to contribute to RESP?

A. The Government contributes Canada Education Savings Grants (CESGs) toward your child’s education directly into the RESP with 20% of every annual deposit, up to $500 per year, If the beneficiary of the RESP is younger than 17 years old. There is a lifetime grant limit of $7,200. That’s a lot of extra money earning interest for your child’s education.

The Government of BC offers extra help for eligible children through the BC Training and Education Savings Grant (BCTESG). The grant is for $1,200 and available to BC residents. To be eligible, both the beneficiary and Primary Care Giver must be BC residents, an RESP account must be opened for the beneficiary, and the application must occur between the beneficiary’s 6th and 9th birthday.

The children born on or after January 1, 2004 in modest income families will receive an initial $500 Canada Learning Bond (CLB). The Canada Learning Bond (CLB) also includes an additional payment of $100 for each previous and subsequent year of eligibility, up to 15 years for a maximum of $2,000.


Q. Is there any limit on the amount to be contributed?

A. Yes, the maximum lifetime contribution limit is $ 50,000.

Q. What happen if I exceed the maximum lifetime contribution limit?

A. Over contributions are not entitled to government grants, and You will be subject to a penalty of 1% per month on the over contributed amount until withdrawn. For more information on penalties, visit CRA website.

Q. Can a lump-sum contribution be made?

A. Yes, however the entire lump sum amount will not be eligible for a government grant and future government grants would not be available on lump-sum amount contributed.

Q. How can funds be withdrawn from an RESP?

A. Withdrawals from RESPs can be in the form of payments of Capital, Income, CESG, and/or Canada Learning Bond to the Beneficiary, withdrawals of excess contribution, withdrawals of contribution from capital to Subscriber, withdrawals of income for Educational Institutional Payment, withdrawal of income as transfer to Subscriber’s RRSP, or as cash. For withdrawing your RESP contact your branch.

Q. What happens if the child chooses not to pursue post-secondary education?

A. If the child who is named beneficiary of the RESP chooses not to pursue post-secondary education, the following options are available:

•    If you have a family plan, you can designate another beneficiary to receive the government grants (to a maximum of $7,200 per beneficiary) and earnings.
•     If you have an individual plan, you may be able to name an alternate beneficiary.
•     If the beneficiary has reached 21 and the plan is at least 10 years old, the subscriber can withdraw the earnings, subject to withholding tax and a 20% penalty tax unless transferred to an RRSP. The amounts withdrawn will be considered taxable income.

The subscriber can withdraw the initial contribution with no tax consequences since it was made with after-tax dollars, but if it is not used for educational purposes, then any CESG remaining in the plan must be repaid, to a maximum amount equal to 20% of the withdrawal.