Answers to your Questions

How does a group RESP work?

RESP contributions are pooled together in order to earn a higher return on investments than would be possible on an individual basis. Investment income accumulates tax-free within the plan and when your child is ready to pursue a post-secondary education, the principal is returned to you tax-free. Your child receives the investment income from the plan as Education Assistance Payments.

Is my principal ever at risk?

No. Your principal is protected and returned to you in full.

What happens if my child does not pursue post-secondary studies?

You have several options.

1. You may transfer the plan to another beneficiary.
2. If the child is over the age of 21 and the plan has been open for over 9 years, you may transfer up to $50,000 of interest to your RRSP or spousal RRSP tax-free, provided you have sufficient contribution room. Any government grants will need to be returned to the government.
3. You may simply withdraw the interest as income and pay tax on it at your marginal rate, plus an additional tax of 20%.
4. Your principal will always be returned to you tax-free.

Who can start a Canadian Scholarship Trust Plan?

Parents, grandparents, relatives and friends may start an RESP for a child.

What are the tax advantages?

An RESP offers distinct tax advantages in three ways. First, the investment income earned on your principal grows tax-free within the plan. Second, your Government Grants also earn tax-sheltered interest within the plan. Third, when the investment income from the plan is paid out as Education Assistance Payments, it is taxable in the student's name, so there is usually little or no tax payable. Contributions to an RESP are not tax-deductible.

How much money can I contribute?

Canadian Scholarship Trust Plans are designed to suit all budgets. With the Group Savings Plan, you can start a plan for as little as $9.50 a month for a child under one year of age or take full advantage of the Federal Government's RESP contribution limit of $50,000 per child over the life of the plan.

With the Individual or Family plan, you can open a plan with a minimum of a $150 initial contribution to a maximum of $50,000 per child over the life of the plan.

Does the plan require a lot of time to manage?

No time at all! You only have to make the one-time decision to start a plan, and we'll do the rest. We manage your funds for you and send you an annual statement of your account. We can even arrange automatic contributions from your bank account so that you never have to worry about it.

How do I apply for the government grants?

As your RESP administrator, we will apply for all eligible grants on your behalf once we receive your child's Social Insurance Number and your grant(s) application form(s).

Is it necessary to begin post-secondary education immediately after high school?

No. If your child wishes to postpone starting post-secondary education for a year or so, simply notify the Canadian Scholarship Trust Foundation in writing and the necessary adjustments will be made. The time limit is age 26, or before the 26th year from the plan start date, whichever comes first.