Registered Education saving plans (RESP)

RISK AND RETURN

Investments like stocks and mutual funds are riskier than T-Bills and GICs because they do not guarantee your investment. GICs products are low risk but tend to have lower returns. Mutual funds may offer potentially greater returns, but they are riskier than GICs because you can lose some or all of your investment if the fund value falls.

COSTS AND CONTROL OF THE PLAN

You the subscriber or plan owner make the investment decisions for the self-directed account. You can spend some time to learn and manage your investment or get the services of an investment advisor to manage your investments for you, but you may pay advisor fees. The fees charged depend on the investments you choose. Expect to pay sales charges if you purchase mutual funds, as well as a management fees. If you purchase securities(stocks), expect to pay transaction costs, unless you are strictly purchasing GICs products.

Flexible contribution schedule:

You may invest lump sum or contribute monthly subject to your maximum lifetime or yearly allowable limits for CESG attractions. You may stop or start your contributions any time without any restrictions or penalties and limitations form the promoter.

Cancellation Costs and Restrictions:

If your child does not attend an eligible post-secondary school, you receive your contributions back net of any fees .The Earnings on the investments may be rolled into your RRSP provided there is a contribution room, or withdrawn with tax consequences. The CESG (grant) must be repaid to Government.

Pooled Individual or Family Scholarship Trust Plans:

A pooled individual scholarship trust plan is a registered account with a scholarship plan dealer, where your contributions are pooled with those of other investors. You decide the amount of the contributions that go to your RESP(s). You can designate one beneficiary with an individual plan, and one or more beneficiary with a family plan.

RISK AND RETURN

Scholarship plans are limited in their investment options. They generally must invest in fixed income securities such as bonds, T-bill and GICs. While low risk, these investments also tend to have lower returns.

COSTS AND CONTROL OF THE PLAN

The pooled plan’s investment managers make the decisions, giving them full control over your investment. You can expect to pay the following fees in scholarship trust plans:

  • Enrolment fees (some cases 100% charged upfront while in others 50% upfront and rest 50% within couple of years of plan opening date)
  • Administration fees
  • Investment management fees
  • Depository fees
  • Trustee fees
  • Custodian fees
  • Transaction fees
  • INDEPENDENT REVIEW COMMITTEE Fee(IRC)

Some fees are paid up front from your contributions, which decrease the total amount you have invested.

Cancellation Costs and Restrictions:

If your child does not attend an eligible post-secondary school, you receive your contributions back net of above mentioned fees.The Earnings on the investments may be rolled into your RRSP provided there is a contribution room, or withdrawn with tax consequences. The CESG (grant) must be repaid to Government.

Pooled Group Scholarship Trust Plans

A pooled group scholarship trust plan is a registered account with a scholarship plan dealer, where your contributions are used to purchase plan units. At maturity you share in the pooled earnings of investors with children the same age as yours, if your child goes to on to eligible post-secondary education. Salespeople may get incentives like vacations for selling a certain number of units.The returns for pooled group plans depend on attrition (earnings forfeited from the plan holders who leave plan prematurity). If you drop out of the plan, others benefit because you forfeit your earnings to the plan.

RISK AND RETURN

Pooled group plans can be risky-if you miss a contribution, your account may go into default and you may lose your plan membership. If you miss a contribution and are allowed to stay in the plan, you will have to pay interest on the missed payment. The interest owing can grow over time to an amount that is difficult to repay.

Scholarship plans are limited in their investment options. They generally must invest in fixed income securities such as bonds, T-bill and GICs. While low risk, these investments also tend to have lower returns.

COSTS AND CONTROL OF THE PLAN

The pooled plan’s investment managers make the decisions, giving them full control over your investment. You can expect to pay the following fees in scholarship trust plans:

  • Enrolment fees (some cases 100% charged upfront while in others 50% upfront and rest 50% within couple of years of plan opening date)
  • Administration fees
  • Investment management fees
  • Depository fees
  • Trustee fees
  • INDEPENDENT REVIEW COMMITTEE Fee(IRC)