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RESP Guide
(investor friendly)
Overview of an RESP, including contribution limits, government grants, key deadlines and taxation.
RESP
Registered Education Savings Plan (RESP)
Making education savings simple and effective
An RESP is a registered savings plan designed to help save and grow funds for a child’s post-secondary education. The Government of Canada and certain provinces offer grants to support education savings. While contributions aren’t tax-deductible, the money and any grants it earns can grow tax-free until withdrawn for educational purposes.
Five reasons to invest in an RESP
Tax-deferred growth
Earnings on investments within an RESP grow tax-free until withdrawn, maximizing growth potential.
Government grants
The Canadian government offers the Canada Education Savings Grant (CESG), boosting your contributions.
Flexibility
Funds can be used for various educational expenses, including tuition, books and living costs.
Long-term savings
Disciplined savings for your child's future education can help reduce financial stress.
Transferable benefits
If the intended beneficiary doesn't pursue post-secondary education, the RESP can be transferred to another beneficiary or used for other purposes under certain conditions.
Resources
Frequently asked questions
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1. What provincial grants does Mackenzie support?
Mackenzie supports both the Quebec Education Savings Incentive (QESI) and the British Columbia Training and Education Savings Grant (BCTESG).
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2. Who can contribute to the RESP?
The Income Tax Act requires that all contributions to a given RESP must be made “by or on behalf of the subscriber”. Mackenzie will accept subscriber and non-subscriber contributions from immediate family members only, such as parent, grandparent and/or aunt/uncle.
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3. What is the application timeline for British Columbia Training and Education Savings Grant (BCTESG)?
Subscribers have a three-year period to apply for the BCTESG; between the child’s sixth and ninth birthday. The BCTESG is a lump sum payment of $1,200 to eligible beneficiaries (no contribution required).
Note: Each fall, Mackenzie sends a courtesy notice to advisors of beneficiaries eligible to apply for the BCTESG approaching the deadline.
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4. How to determine a child’s contribution history and current CESG room?
Employment and Social Development Canada (ESDC) will generally release information it has on file with respect to a particular child’s CESG history to that child’s custodial parent or legal guardian, or someone specifically authorized by that person to receive the information. The parent/guardian/delegate can contact ESDC directly 1-888-276-3624 to obtain this information.
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5. Can the Canada Learning Bond (CLB) be shared between siblings?
The CLB cannot be shared with another beneficiary. CLB can only be used by the child for whom it was originally paid.
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6. Can I delay RESP contributions?
Delaying contributions to an RESP can have several implications, especially when it comes to maximizing the benefits of the plan. Here are the key drawbacks:
- If you delay contributions, you may not receive the full CESG amount unless you catch up in future years (which is limited to one year of carry-forward at a time), and you can only receive a maximum of $1,000 in CESG per year.
- You will have less time for compound growth, which can significantly reduce the total value of the RESP by the time the child is ready for post-secondary education.
- Delaying contributions may require larger lump-sum payments later to catch up, which can be financially burdensome compared to smaller, regular contributions.
Consider setting up a pre-authorized chequing plan (PAC). This simple investment strategy lets you make RESP contributions, by purchasing mutual fund or ETF securities for example, on a periodic basis, such as weekly, monthly or quarterly, in a predetermined amount. Amounts as small as $50 per month can be easily deducted from your personal bank account and invested in your RESP.
Open an account in three easy steps
*Investors should contact their advisor to set up an RESP account with Mackenzie Investments.
RESP at a glance
Like any registered account, there are rules around RESPs. Here are some important numbers to bear in mind:
$50,000
The lifetime contribution limit per child.
$7,200
The lifetime maximum CESG amount per beneficiary.
Dec. 31
Contribution deadline every year, to be eligible for matching government contributions.
20%
The CESG limit for your contribution, to a maximum of $500 per beneficiary per year.
35 years
Maximum number of years for which an RESP can remain open.
32 years
Number of years you can contribute to an RESP.
Resources
Frequently asked questions
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1. Who is the subscriber?
The individual who owns, creates and funds the RESP, and makes all decisions with respect to the RESP, is referred to as the subscriber.
A subscriber must be one of the following:
- An individual.
- An individual and their spouse or common-law partner (as joint subscribers).
- An individual and their former spouse or common-law partner, if they are together the legal parents of the beneficiary (as joint subscribers).
- A public primary caregiver of a beneficiary (such as a public trustee, Child and Family Services Agency, etc.).
- A “designated subscriber” (such as the Minister in charge of administering the Canada Education Savings Act).
A public primary caregiver can only be the subscriber if that public primary caregiver is receiving the special allowance with respect to the beneficiary – that is to say, if the child is in the control of the public primary caregiver.A corporation may not be a subscriber unless it is a public primary caregiver.
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2. Are there different age limit requirements for the beneficiary, for individual and family RESPs?
If the RESP is an individual RESP, the beneficiary can be any age and have any relationship to the subscriber, including being the subscriber.
If the RESP is a family RESP, any beneficiary added to the RESP must at that time be under 21 (or have been the beneficiary of a different family RESP immediately prior to becoming a beneficiary to the new RESP) and be connected by blood or adoption to the original subscriber.
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3. The parents confirm that the grandparents have an RESP for their child at another financial institution. Can they still open a new RESP for their child at Mackenzie?
Yes. There is no limit on the number of RESPs to which an individual can be a beneficiary, although there are contribution limits. Each of the beneficiary’s RESPs is equally eligible to receive CESG, but only one RESP can receive the Canada Learning Bond (CLB). If different RESPs are receiving contributions at the same time, then each will receive CESG until the grant room runs out, on a first-come, first-served basis.
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4. Who is the primary caregiver (PCG)?
With respect to an RESP, a “primary caregiver” is the individual who is eligible to receive the Canada Child Benefit, or the department, agency or institution that receives a special allowance payable under the Children’s Special Allowances Act. This person is sometimes referred to as the “eligible individual”. In some families, the CCB is not payable because family income is too high, but the primary caregiver is the person who would be receiving the CCB on behalf of the child, if the family income had been sufficiently low.
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5. Why is primary caregiver information needed to apply for Additional CESG (ACESG) and/or the Canada Learning Bond (CLB)?
Prior to 2018, the consent of the primary caregiver was required for Additional CESG and CLB.
Starting in 2018, the consent of either the primary caregiver or the primary caregiver’s current spouse or partner, is required for ACESG and CLB. The consent of a primary caregiver or their spouse is not required for Basic CESG, for which the consent of a mere custodial parent is sufficient.
Consent of the primary caregiver or their spouse or partner is required for ACESG/CLB because eligibility for these benefits is based on the combined income of the primary caregiver and their spouse or partner. The fact that an RESP has received or been refused ACESG and/or CLB will indicate to the subscriber what the primary caregiver’s family income level is, which is confidential information.
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6. What forms are needed to open a new Mackenzie RESP?
- Mackenzie RESP application form (either individual or family plan); and
- SDE0093 Application for Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB)
- Annex A Additional Beneficiaries is also required if a family plan lists more than one beneficiary.
- Annex B Primary Caregiver or their spouse and/or custodial parent/legal guardian is also required if the subscriber on the RESP is not the PCG or their spouse and/or the custodial parent or legal guardian.
Note: The grant application is not mandatory to open the RESP. However, it is mandatory if the subscriber wishes to apply for CESG and CLB on behalf of the beneficiary.
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7. Why is the relationship between the subscriber(s) and beneficiary(ies) on a family plan important?
The beneficiary to a family RESP must be related (connected) to the subscriber.
The Income Tax Act (ITA) requires that beneficiaries of family RESPs are connected by blood or adoption to the subscriber. The ITA defines these terms as follows:
- Blood relationship: a connection between a child and each parent and between a child and each set of grandparents. There is also a connection between siblings.
- Sibling: a brother or sister, including the child of the common-law partner or spouse of a parent of the beneficiary.
- Adoption:
- Legal: when beneficiaries are legally adopted, they are considered to be connected to the adoptive parents and to both sets of grandparents.
- In fact: in the case of a child of a spouse living in a common-law relationship, the beneficiary is considered to be adopted “in fact” if the spouse provides parental care on a continuing basis.
Note: The beneficiary to an individual RESP does not need to be related or connected to the subscriber.
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8. Can a new RESP be opened if the beneficiary is a non-resident?
Under paragraph 146.1(2)(g.3) of the Income Tax Act, an RESP cannot be established for a beneficiary who is a non-resident at the time, and contributions cannot be made on behalf of a beneficiary who is a non-resident at the time. An exception may apply with respect to transfers, if the non-resident beneficiary of the receiving RESP had been a beneficiary of the receiving RESP.
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9. What is the difference between a custodial parent or legal guardian and a primary caregiver?
A primary caregiver will always be a custodial parent or legal guardian, but not all custodial parents or legal guardians are primary caregivers. This is because to be a primary caregiver, you must be the person who is eligible to receive the Canada Child Benefit with respect to a child, and the CRA will only pay the CCB to one person at any given time, with some exceptions for separated parents.
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10. What is the difference between an individual and a family plan?
Mackenzie offers two types of RESP plans:
Individual
Features:
- Only one beneficiary per account.
- Beneficiary is not required to be related to the subscriber.
- Permit contributions, plan income and CESG to be shared between siblings by way of eligible transfers between RESPs.
- Eligible to receive all federal and most provincial grants/bonds.
Family
There are two types of family RESP plans:
- Siblings only: Each beneficiary must be a sibling, half-sibling, adopted sibling and/or stepsibling to each other.
- Non-siblings: Each beneficiary does not need to be a sibling, for example, they may be cousins.
Features:
- Can have multiple beneficiaries per account.
- Beneficiaries must be related to the subscriber (each beneficiary must be a child or grandchild of the original subscriber).
- Contributions, plan income and CESG can be shared among named beneficiaries.
- Eligible to receive federal and provincial grants/bonds, depending on the type of family RESP:
- Siblings only:
- Canada Education Savings Grant (CESG) (basic or additional).
- Canada Learning Bond (CLB).
- British Columbia Training and Education Savings Grant (BCTESG).
- Quebec Education Savings Incentive (QESI) (basic or additional).
- Non-siblings:
- Canada Education Savings Grant (CESG) (basic only).
- Quebec Education Savings Incentive (QESI) (basic only).
- Siblings only:
For more information, refer to ESDC’s InfoCapsule 7: Family plan versus individual plan
Making a withdrawal
from an RESP
The money in an RESP can come from many sources, and there are also different ways to withdraw from the account. Understanding the rules and types of RESP withdrawals can help you effectively manage your clients’ education savings. Be sure to have the necessary documentation and that you are aware of the tax implications associated with each type of withdrawal to maximize the benefits of the RESP.
Four types of withdrawals
Withdraw from an RESP in two easy steps
Resources
Frequently asked questions
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1. How can I check to see if the school is approved?
If the school is within Canada, refer to the federal and provincial lists to ensure the school is approved.
Federal:
List of certified institutions
List of designated educational institutions
Provincial:
Northwest Territories
Nunavut
Saskatchewan
Yukon
A valid post-secondary institution outside of Canada does not have to be on the federal list. It must be of a technical or vocational nature designed to furnish one in an occupation.
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2. Why is beneficiary residency important for Education Assistance Payments (EAP)?
A beneficiary must be a resident of Canada to be entitled to redeem and use government funding programs portion of the RESP, such as an EAP.
The British Columbia Training and Education Savings Grant (BCTESG) is an exception, as the beneficiary is not required to be a resident of Canada to withdraw this incentive for educational purposes.
A beneficiary must be a Québec resident for tax purposes (at the time of the EAP) to redeem the Québec Education Savings Incentive (QESI) portion of the account.
An EAP for a non-resident beneficiary will be subject to applicable withholding tax based on the amount of redemption.
Beneficiary residency (for tax purposes) must be provided on the educational withdrawal form.
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3. Are apprenticeships a valid post-secondary program?
Yes. However, only classroom training through an approved post-secondary educational institution is considered. The Canada Revenue Agency (CRA) has confirmed “on the job hours” are not approved.
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4. Can I provide multiple documents for Proof of Enrollment (POE), or does it have to be all in one?
Multiple documents may be provided to capture all the POE requirements.
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5. What are EAP limits?
There is an EAP redemption limit of $8,000.00 (net) for the first 13-week period that a student attends an educational institution. Once a student has completed 13 consecutive weeks of full-time studies, they are not subject to any EAP limits, regardless if they have or have never made an EAP request.
Cumulative EAPs to a part-time student in a “specified educational program” are limited to $4,000 (net) for each 13-week period that they attend an educational institution, if they are in a program that requires at least 12 hours per month of course time.
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6. When is past proof of enrollment required?
If a beneficiary is requesting an EAP such that the cumulative EAPs within the last 12 months will exceed $8,000, they may be required to provide proof of past enrolment — even if they have already provided proof of current enrolment for several years. It must be shown that within the last 12 months they have been enrolled for at least 13 consecutive weeks, otherwise the EAP limit is applied.
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7. The subscriber is not a resident of Canada and does not qualify for an Accumulated Income Payment (AIP). What options are available to close out the RESP?
Non-resident subscribers can request a “Payment to a Designated Educational Institution” (in Canada) of the income/growth to close out the RESP.
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8. Will Mackenzie issue a donation slip if the subscriber requests a Payment to a Designated Educational Institution?
No. This is considered a gift and Mackenzie will not issue a donation slip.
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9. The subscriber had EAPs at another financial institution. Is it important to include this information?
Yes. Mackenzie does not have access to confirm any Canada Education Savings Grant (CESG) where the beneficiary has redeemed any EAPs at another financial institution. It is important to include the dollar value of CESG redeemed previously from another institution to ensure the beneficiary does not receive excess CESG. A beneficiary is limited to $7,200 of lifetime CESG in EAPs. Any excess CESG received must be repaid by the beneficiary to Employment and Social Development Canada (ESDC).
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10. Are EAP limits per-promoter?
The $8,000 and $4,000 limits are on a “per promoter” basis. A beneficiary can receive the maximum EAP from their RESP at one institution and can also receive an EAP from their RESP at another institution.
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11. What tax slips are issued for EAP and Post-Secondary Education (PSE) withdrawals?
If an EAP is paid to a beneficiary who is a resident of Canada, the RESP promoter will report the amount of the payments on a “T4A”, box 42 (“RESP Educational Assistance Payments”). In Quebec, it will be reported on a Relevé 1, box O (“Other income”), using the code RU (“Amounts paid to the beneficiary under an RESP”).
The amount shown on the T4A slip is reported as “other income” on Line 13000 of the beneficiary’s federal tax return. This amount is not considered earned income for the purpose of determining RRSP contribution limits. It is not considered a scholarship or bursary, which are tax-exempt. Income tax will not be withheld at source on EAPs, unless the student is a non-resident.
If the beneficiary is a non-resident of Canada for tax purposes, then the RESP promoter will report the amount of the payments on an “NR4”, income code 24 (RESP).
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12. Can only grants be redeemed in EAPs?
No. The value of grant(s) plus income is determined by the EAP formula (as per the Income Tax Act).
Exception: if the subscriber reports the beneficiary has received the CESG lifetime limit of $7,200 in previous EAPs or provides the amount of CESG withdrawn in previous EAPs, encroaching on the lifetime limit; Mackenzie can adjust the EAP formula (reduce the CESG value). EAPs may not consist of grant money alone.
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13. What are the tax implications on EAPs?
EAPs are taxed in the hands of the beneficiary pursuant to paragraph 56(1)(q) of the Income Tax Act. If the beneficiary is a resident of Canada for tax purposes, then the RESP promoter will not withhold any taxes at source on the EAP. If the beneficiary is a non-resident of Canada for tax purposes, then the RESP will withhold 25% non-resident tax at source (and the EAP will not include grants/bonds, except for BCTESG).
The amount shown on the T4A slip is reported as “other income” on Line 13000 of the federal tax return of the beneficiary. This amount is not considered earned income for the purposes of determining RRSP contribution limits, and it is not considered a scholarship or bursary and thus tax-exempt. Income tax will not be withheld at source on EAPs, unless the student is a non-resident.
If the beneficiary is a non-resident of Canada for tax purposes, then the RESP promoter will report the amount of the payments on an “NR4” income code 24 (RESP).
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