Registered Education Savings Plan (RESP)
Self-Directed RESP
A Registered Education Savings Plan, or RESP, is a special savings plan to help you save for a child's post-secondary education. With the rising costs associated with sending a child to college or university, an RESP can really help because the government provides grants while the savings grow tax-deferred until withdrawn. When the student withdraws the funds for educational purposes, the withdrawals are taxed in the student's hands, typically at a lower rate.
TD Direct Investing offers you the complete range of all the investment options available for the low annual administration fee of $50 plus tax.
Who qualifies as a RESP beneficiary?
TD Direct Investing offers Family Plans only1.
You can enroll more than one beneficiary in a single Family Plan if they are related by blood or adoption, and one child may be enrolled in multiple RESPs. Plus, you have the flexibility to change your beneficiary at any time.
The beneficiary is required to use the funds to pay for either full-time or part-time studies at a post-secondary level in a qualifying educational program requiring a minimum of 10 hours of instruction or work per week in a course lasting at least 3 consecutive weeks. A program at a foreign educational institution must last at least 3 weeks Students aged 16 and over who are enrolled in a qualifying educational program requiring a minimum of 12 hours per month in a course lasting at least 3 consecutive weeks are also eligible to use RESP funds. Qualifying educational programs include apprenticeships, and programs offered by a university, college, CEGEP or trade school.
1Refers to the TD Securities Inc Self-Directed Education Savings Plan
How much can I contribute to an RESP?
There is no maximum yearly contribution limit for an RESP. However, there is a maximum lifetime contribution limit of $50,000 per beneficiary, for a term of 31 years. One beneficiary can be designated in more than one plan and the maximum contribution limit for that beneficiary applies to all such plans as a group.
RESP proceeds must be used within 35 years of the start of the plan. If the beneficiary decides not to attend a post-secondary educational institution, you can appoint a different beneficiary. Otherwise, the investment income can be transferred within certain limits as an Accumulated Income Payment either to your personal or spousal RSP* or in the form of a cash withdrawal subject to taxes and certain restrictions. Contributions to the plan can be withdrawn at any time with no tax consequences.
*Subject to Canada Revenue Agency (CRA) regulations.
1Refers to the TD Securities Inc Self-Directed Education Savings Plan
Government grants help savings grow
The Government of Canada encourages saving for a child's education after high school by making contributions to a child's RESP with grants - that's even more money to grow your savings!
Canada Education Savings Grant (CESG)
The basic Canada Education Savings Grant (CESG) will top up your annual contribution by 20%, up to $500 per beneficiary each year to a lifetime limit of $7,200. If the beneficiary has carry forward grant room, the client can receive to up to an additional $500 in Carry Forward CESG for a total of $1,000 in CESG per beneficiary per year. Additional CESG grants may be available, depending on your income. TD Direct Investing offers only the Canada Education Savings Grant and the Quebec Education Savings Incentive, not any other federal or provincial grants or incentives.
| Summary of Basic and Additional CESG | ||
|---|---|---|
| Family net income* | CESG rate on first $500 (or less) in contributions per year | CESG rate on contributions between $500 and $2,500 per year |
| $41,544 or less | 20% basic + 20% additional | 20% basic |
| $41,545 - $83,088 | 20% basic + 10% additional | 20% basic |
| More than $83,088 | 20% basic | 20% basic |
*Figures may change annually.
For example, if your net family income is $60,000, and you contribute $2,000 in a year, the government CESG contributes an additional $450 to the child's RESP.
The Canada Learning Bond (CLB)
This grant is available to children born on or after January 1, 2004, whose families are eligible to receive the National Child Benefit Supplement. The Canada Learning Bond (CLB) can add up to $2,000 to your RESP per child.
Provincial Grants
The Québec Education Savings Incentive (QESI) is an annual refundable tax credit from the provincial government available to eligible RESP beneficiaries who reside in Québec.
1Terms and conditions of the grants are subject to change at any time by the federal or applicable provincial government.
Note:
The TD Securities Inc. Self-Directed Education Savings Plan supports only the basic Canada Education Savings Grant and the QESI (Quebec Education Savings Incentive) and not any other provincial or federal government RESP grants or tax incentives.