The Financial Consumer Agency of Canada, a government watchdog for financial institutions,
compiled a list of questions you should ask your RESP provider before
opening an account. Click the questions below to display our answers.
Does it
cost anything to open an RESP?
No, there is no cost to open an RESP account.
Once I
have opened an RESP, will I have to pay any fees? If so, what are they for and how
much will I have to pay?
Questrade does not charge annual or maintenance fees for registered accounts.
Do I have
to put in a minimum amount of money to open an RESP?
The minimum amount of funding for a Questrade account is $1,000 CAD. The government
allows for a maximum contribution of up to $4000 per beneficiary per calendar year,
to a lifetime maximum of $42,000 per beneficiary (child).
Do I have
to make a regular payment? What happens if I cannot make a regular payment? Do I
lose my investment?
No, you do not need to make a regular payment. You can make a contribution whenever
you would like to.
What are my investment choices? What are the pros and cons of each choice? Can the value
of my investment go down?
You can purchase stocks, mutual funds, GICs, gold, and bonds in a Questrade registered
account. Each type of investment carries its own level of risk and reward. As with
any financial decision, you should inform yourself about the different kinds of
investments you can make in your RESP. For instance, a GIC will provide a modest,
low risk, annual rate of return. A stock could provide an exceptional
return – or drop in value, depending on various factors (the performance of the
underlying company, political, general economy, etc).
Can I withdraw
money if I need it? Are there penalties for withdrawing money early?
You may withdraw the income earned in the RESP if:
- All the persons named in the plan are at least 21 years old and not pursuing a post-secondary
education;
- You are a Canadian citizen;
- The RESP has existed for at least 10 years.
Can I transfer
the RESP to another person or to another RESP provider? What is the cost to transfer?
Yes, you can transfer your RESP account to another promoter. The cost for a full
transfer is $125, for a partial transfer the cost is $25.
What will
happen to my savings in the RESP if my child does not continue his or her education
after high school?
While the Canada Education Savings Grant can be used for another child's education,
the Canada Learning Bond cannot be transferred. It must be returned to the Government
of Canada. Any amount that you have contributed as well as any generated income
goes to you.
Government regulations stipulate certain additional conditions:
- Withdraw the earnings as cash (subject to income tax in the year of withdrawal and
a 20% penalty may apply);
- Select another beneficiary if the plan permits;
- Donate the plan's earnings to a qualified educational institution;
- Make a tax-free capital withdrawal of your total contributions;
- Transfer up to $50,000 of income earned to your individual or spousal RRSP, considering
unused contribution room.
Does the
RESP provider limit the types of qualified educational programs that I can use my
savings for?
There is no limit to the types of qualified educational programs. However, to be
able to make a withdrawal, the beneficiary must be enrolled full-time in an institution
recognized by the government.
What happens
if I close my RESP early?
From the government's perspective, there are a number of implications to keep in
mind. If the withdrawal is not a PSE (post-secondary education) withdrawal or a
capital withdrawal, any grant received on the contributions must be returned to
the government. Educational assistance payments, or the accumulated earnings on
contributions grants, is considered as taxable income by the student. Since students
generally have negligible other income, it is possible there could be little or
no tax impact.
You will also incur certain costs if you close the RESP account early or if you
don't have a beneficiary who can use the money for further education:
- You must return any Canada Education Savings Grants.
- Any money you have contributed will be returned to you. However, any fees incurred
within the RESP will not be returned.
And one extra by our RESP experts:
Summarizing RESPs
We've compiled a list of some key aspects of RESP regulations. Please refer to official
federal government documentation for complete details
- Any child can be a beneficiary;
- Funds in the plan grow tax-free until the beneficiary is enrolled full-time in a
qualified educational institution;
- RESP contributions are not tax deductible. Contributions are not taxed when returned
to the subscriber;
- Parents, grandparents, relatives and friends may contribute a combined total of
$4000 per year into a particular beneficiary's plan
- Contributions to all RESPs are subject to a $42,000 lifetime limit;
- Subscribers can contribute up to 22 years after a non-family plan has been opened
and up to the year in which the beneficiary turns 21 years of age in a family plan;
- Once enrolled, the beneficiary (student) can draw EAPs (Educational Assistance Payments)
from the plan to help finance educational costs;
- If the beneficiary does not continue with full-time education, another beneficiary
can be named (subject to the plan's terms). Refer to the government's website for
a complete list of rules governing RESPs.
