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Registered Education savings plan (RESP)

Help grow their ambitions. Talk to an advisor.

Available now, the Registered Education Savings Plan (RESP) allows you to help support the educational expenses of children. Your investment grows tax-free and is further supported by government grants.

 

WHAT IS AN RESP?

Created by the federal government, the RESP is a savings plan designed to help you finance the post-secondary education of your children. If you are a parent, guardian, grandparent, a family member or a close relative (subscriber), aged over 18 and a Canadian resident, you can open an RESP for a child (beneficiary).

When the beneficiary begins his or her studies, they will be able to take advantage of a substantial amount of money to cover tuition fees and other education-related expenses, thereby reducing their level of indebtedness, if applicable.

Saving in an RESP is advantageous:

  • It allows you to contribute up to $50,000 per beneficiary (over the term of the plan).
  • The total of the income generated in an RESP grows tax-free until the time of withdrawal.
  • Your savings are enhanced thanks to government grants:
    • The Canada Education Savings Grant (CESG) is equivalent to 20% of your annual RESP contributions, up to a lifetime maximum of $7,200 for each beneficiary + an additional 10% CESG on the first $500 or less of contributions paid based on net family income. See Features section.
    • The Canada Learning Bond (CLB) provides $500 in the first year and $100 in subsequent years to RESP beneficiaries (born in 2004 or later) who meet the conditions. See Features section.
    • The Quebec Education Savings Incentive (QESI) is equivalent to 10% of the annual net contributions to the plan, up to a maximum of $250 per year per child. + additional grant of up to $50 per year for low-income families for a maximum of $3,600 in lifetime grants for each beneficiary.
  • You can retroactively claim unused grant room and contribute more in a given year.
  • Your grants are invested directly in the investment product you have chosen.
  • You can save automatically with the periodic savings plan.

 

Amount accrued after 18 years
GRAPH

$10,433 RESP benefit

Example based on:

  • $110 monthly contribution at the beginning of the month.
  • Annual return of 4.25% (considered a conservative return for a balanced portfolio by the IQPF).
  • These calculations take into account only the basic grants (Quebec and federal).
  • Taxes on the returns and grants are then paid by the student (who generally benefits from being in a lower tax bracket).
  • Quebec grants are normally paid in May of the year following the contribution and automatically invested.


Open an RESP in 5 simple steps

  1. Required to have the beneficiary’s social insurance number (SIN).
  2. Talk to an advisor to establish an investment strategy.
  3. Determine an RESP plan: family or individual
  4. Choose an investment.
  5. Establish the amount and frequency of contributions.

 

FEATURES
Eligible investments
  • Symmetry Portfolios (LB or LW series only).
Contributions
  • Annual cap of $2,500 on the maximum grant (contributions in excess of $2,500 per year do not qualify for additional grants).
  • As part of a “catch-up strategy,” you can “buy a year” by making a second contribution of up to $2,500 that qualifies for grants.
  • Lifetime annual cap of $50,000.
  • Contributions belong to the subscriber.
Canada Education Savings
Grant (SCEG)
  • This grant is equivalent to 20% of your annual contributions, up to a maximum of $500 per year per child. The lifetime CESG amount can be up to $7,200.
  • The CESG is paid into the RESP on behalf of the beneficiary until the end of the year in which they turn 17.1
  • An additional 10% CESG on the first $500 or less of contributions is paid if the caregiver’s net family income is between $49,0202 and $90,0402 and 20% if the income is less than $49,020.
Canada Learning Bond (CLB)
  • This grant is intended for low-income families whose eligibility is based on the age of the child (must be born on or after January 1, 2004), the number of eligible children in the family and the net family income.
  • A maximum amount of up to $2,000 to an RESP for an eligible child: $500 for the first year and $100 for subsequent years (until their 15th birthday).
Québec Education Savings Incentive (QESI)
  • The basic QESI is equivalent to 10% of the annual net contributions to the plan, up to a maximum of $250 per year per child. $50 more per year for low-income families. The lifetime QESI can be as high as $3,600.
Beneficiaries Family RESP:
  • You may designate one or several beneficiaries.
  • Beneficiaries must be related by blood or legally adopted and under the age of 21 at the time of their designation.

Individual RESP:
  • You may designate one beneficiary, including yourself.
  • There are no age or relationship restrictions on the beneficiary.
Timeframe for contributions
  • Contributions can be made for up to 31 years after the RESP is opened.
Lifetime
  • The RESP cannot remain open for more than 35 years.
Educational Assistance Payment (EAP)
  • A payment is made to a beneficiary when post-secondary studies begin.
  • The EAP includes the grant and accumulated investment earnings.
  • Limit of $5,000 during the first 13 consecutive weeks of studies and no limit afterwards.
  • EAP payments must be declared as taxable income in the year they are received.
  • Contributions remain the property of the subscriber, who may reclaim them once the first EAP is paid out.
Options if the beneficiary does not pursue
a post-secondary education
The subscriber may:
  1. Leave the funds in the RESP.
  2. Designate a new beneficiary.
  3. Transfer the funds to their own RRSP.
  4. Close the RESP.
  5. Transfer funds to a registered disability savings plan (RDSP).
    • Accrued earnings are returned to the subscriber as an accumulated income payment (AIP).
    • Grants must be returned to the government.
Accumulated Income Payment (AIP)
  • The AIP consists solely of the earnings generated under the plan.
  • An AIP is issued once all the following conditions are met:
  • The individual receiving the AIP is the subscriber.
  • The subscriber resides in Canada.
  • At least one of the following three conditions must also be met:
  • The RESP has existed for at least 10 years and
  • Each beneficiary for whom the subscriber has made contributions has reached 21 years of age and does not qualify for educational assistance payments, or
  • The beneficiary is deceased.
  • The subscriber can transfer the AIP to their RRSP, up to a maximum of $50,000 and provided there is still RRSP contribution room.
  • Some or all of the AIP can be transferred to the spouse’s RRSP.
  • If the AIP isn’t transferred to an RRSP, it will be subject to double taxation. This means you will have to pay tax on the growth of investments at your regular tax rate, plus 20% (12% in Québec).


Summary

This investment product is suited for you if:

  • You want to prepare for the post-secondary education of your children, grandchildren, a family member or a close relative.
  • You wish to take advantage of government grants.
  • You seek an investment product with tax-sheltered growth.


This investment product is not suited for you if:

  • Your beneficiary does not expect to pursue post-secondary education and you have no other potential beneficiary.
  • You anticipate the need to access your capital on short notice.




Legal notice

1. Restrictions apply to beneficiaries aged 16 and 17.

2. 2021 income brackets. Income brackets are indexed annually.

Mutual funds are distributed by LBC Financial Services Inc. (“LBCFS”), a subsidiary of Laurentian Bank of Canada (“Laurentian Bank”). LBCFS is a corporate entity separate from Laurentian Bank, B2B Trustco, and any mutual fund company. Registered LBCFS representatives are also Laurentian Bank employees. Accordingly, LBCFS’s liability is limited to the conduct of its representatives in the performance of their duties for LBCFS. Important information is provided in the relevant fund facts. Please read this (or these) document(s) carefully prior to investing. For more information regarding the funds you trade, please refer to their simplified prospectuses. To obtain a copy of the fund facts and/or the simplified prospectus(es) for your fund(s), please contact an LBCFS representative at any Laurentian Bank branch. Commissions, trailing commissions, management fees and other expenses may all be associated with mutual fund investments. Mutual funds offered through LBCFS are not insured by the Canada Deposit Insurance Corporation, Canadian securities regulators, or any other public deposit insurer. Furthermore, these funds are not guaranteed, in whole or in part, by the Laurentian Bank, B2B Trustco, or any mutual fund company. There is no guarantee that the fund will be able to maintain a fixed net asset value per unit or that the full amount of your investment in the fund will be returned to you. The value of funds often fluctuates, and past performance is not indicative of future performance.

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