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RESP recommendations pls
June 10, 2017
12:45 pm
aps
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Hello everyone

I'm relatively new to Canada and I was wondering which financial institution is best for opening the RESP accounts for my children. Any help is appreciated sf-smile

June 10, 2017
2:14 pm
Saver-Mom
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We are happy with Canadian Scholarship Foundation. It is neither a bank nor financial institution, it is purely an RESP provider. RESPs are a great savings vehicle, especially due to the government grants. They differ in how aggressively they invest, vs giving you control in choice of what to invest in, in how the money is returned to you and the child once the plan matures, in what happens if you stop contributing, and whether the money can be rolled over to another person if the child does not go on to study after high-school. Do lots of research.

"The Canadian Scholarship Foundation is one of Canada’s largest and oldest group Registered Education Savings Plan (RESP) providers in Canada with over 56 years of experience providing education savings solutions to families across Canada."

June 10, 2017
3:03 pm
Norman1
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There's lots of information in two previous discussions about RESP's:

  1. Global RESP
  2. RESP with "Knowledge First Financial"

Be very careful with the group RESP's. There can be serious losses, not from their investments, but from the non-refundable upfront fees should parents not be able to make all the contributions agreed to.

In the first discussion, the original poster was going lose over $3,000. sf-frown

June 10, 2017
4:00 pm
Bill
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I agree with Norman1 re the group RESPs, fees! One idea is to open a self-directed RESP account with one of the large banks' discount brokers if you want to pick from a large selection of investments and control the investments choice yourself.

June 10, 2017
4:50 pm
Atlas
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I, too, have heard first hand and also read some real horror stories about group RESPs, enough to convince my wife and me to stay away, and have full control over the investments inside the RESP.

We ending up choosing TD's discount brokerage - Direct Investing, and hold some of their e-series funds inside the RESP. The funds are low MER's (relative to typical mutual funds) and are no-load, but have a 2% early-redemption fee if sold before 30 (or 60?) days of purchase. Our opening balance and frequency and amount of contributions, in part, as well as the no-load fees, directed us towards e-series.

To my recollection TDDI does not offer the Additional CESG (something to be aware of, if eligible), and I cannot say if other big six discount brokerages offer the same service.

We have had to sort out some administrative errors along the way, which required us to contact ESDC to confirm beneficiary information against what TDDI had in their system, and get them to fix it, update ESDC too. But errors do, and can, happen.

June 10, 2017
6:42 pm
Bill
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Atlas, I don't understand your 3rd paragraph. My understanding is it's the government that puts in the CESG, as well as the additional CESG for lower-income folks, directly into the RESP account. What do you mean when you say TDDI doesn't offer it?

June 10, 2017
6:58 pm
Dennis
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Norman1 said
Be very careful with the group RESP's. There can be serious losses, not from their investments, but from the non-refundable upfront fees should parents not be able to make all the contributions agreed to.

In the first discussion, the original poster was going lose over $3,000. sf-frown  

My biggest regret in investing is went with CST. My case, the upfront fees is 9.9% of whole contribution, and it bring down compound annual growth rate to 0.72% for 12 years. sf-cry

June 10, 2017
7:47 pm
Atlas
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Bill said
Atlas, I don't understand your 3rd paragraph. My understanding is it's the government that puts in the CESG, as well as the additional CESG for lower-income folks, directly into the RESP account. What do you mean when you say TDDI doesn't offer it?  

Bill, thanks for point this out. I should clarify that TDDI does offer Additional CESG for contributors with adjusted family net income <= $83,088, as per here: https://www.td.com/ca/products-services/investing/td-direct-investing/accounts/resp/index.jsp#content3

However, some RESP Promoters do not offer A-CESG or CLB (although it's only a few that do not). See: https://www.canada.ca/en/employment-social-development/services/student-financial-aid/education-savings/resp/resp-promoters-list.html

This could be cause for confusion though. TD Securities (TDDI) states ACESG is offered, however the ESDC states TD Securities does not. Best to check with the promoter, just in case sf-cool.

June 10, 2017
7:58 pm
aps
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thanks everyone for the replies so far. i was actually contacted by KFF today after they came to know about the birth of my one month old child. the lady was almost trying to brain wash lol

June 10, 2017
9:09 pm
jobsfolly
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aps

Just to clarify and add onto what has been said already, the answer to your question really depends on how much time you want to put into this and what balance of costs you want to take on.

As has already been mentioned, there are a number of specialized scholarship specialized group plans. Historically these were around before RESPs and have changed form over the years. There are fees to be aware of. You used to take on added risk in the sense that if your kid didn't go to university, some of the "take" from the interest you generated over the years got taken away and distributed to all the others in the plan. I'm not sure this is true any longer, but there are still all the other fees to be wary of.

If you just want an account to sit there and have some mutual funds, bonds, even GICs, etc., and get managed by someone just like your retirement plans, any of the five big banks would be happy to assist you. In general, any major institution that does financial planning for retirement will also be happy to do financial planning for an RESP. e.g. RBC, TD, etc.

If you want to take a more active hand in running it yourself, again, most of the big institutions with a discount brokerage will let you set up an RESP account with them and let you handle the investments inside it. If you take this option the costs etc. are going to be the same as any other registered account with them. e.g. RBC, TD, Questrade, etc.

Basically: unless you're specifically interested in one of the specialized scholarship trust style plans, once this account is set up it's going to work pretty much like a TFSA or RRSP account would, so choose accordingly.

Edit: And since you mentioned your new to Canada, just to avoid more confusion until you've done your research, RRSP and TFSA are registered savings accounts with other tax benefits mainly intended for retirement purposes. The closest American equivalents would be 401(k) and Roth IRA, for these.

June 11, 2017
9:47 am
Norman1
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Atlas said

However, some RESP Promoters do not offer A-CESG or CLB (although it's only a few that do not). See: https://www.canada.ca/en/employment-social-development/services/student-financial-aid/education-savings/resp/resp-promoters-list.html

This could be cause for confusion though. TD Securities (TDDI) states ACESG is offered, however the ESDC states TD Securities does not. Best to check with the promoter, just in case sf-cool.  

Looks like TD Direct Investing's RESP doesn't support the federal A-CESG yet.

Footnote 4 on their TD Direct Investing Accounts & Features page says the following about their TD Direct Investing RESP account:

4 Refers to the TD Securities Inc. Self-Directed Educational Savings Plan.

The fine print at the bottom of the page you mentioned https://www.td.com/ca/products-services/investing/td-direct-investing/accounts/resp/index.jsp#content3 says

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.

Looks like the TD Direct Investing RESP is not the best account for those that qualify for the A-CESG. That would be families with net family income under $90,500.

This is the exact qualifications and A-CESG grant amount from ESDC: Additional Canada Education Savings Grant - Eligibility:

Income levels

The first $500 contributed into a child’s RESP, the Additional Canada Education Savings Grant could add:

  • $100, if net family income is $45,282 or less ($500 x 20% = $100)
  • $50, if net family income is between $45,282 and $90,563 ($500 x 10% = $50)

Note: Children in care, such as those in foster care, automatically qualify for the yearly $100 amount.

Net family income limits are updated every year. This example is based on 2016 income levels.

June 11, 2017
11:07 am
aps
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being relatively new here, our net family income was below 40k last year, so based on that direct investing RESP doesn't look best option then.

my goals are long term only and i'm pretty optimistic about both of my kids going to universities. i am only using Tangerine as my main bank so far but they don't offer RESPs.

June 12, 2017
5:14 am
Save2Retire@55
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Honestly, best is to open a trading account (mine is with Questrade) and buy ETFs. Easy and Cheap.

Whatever you do, stay away from group RESPs. I opened mine with KFF 4 years ago and that was a tragedic mistake. On $5K contribution, the fees were about $1k. Basically 20%. I didn't close it and want to see if at the end I can recover those fees through the group allowances.

Again do not use them and if you do make sure to avoid signing up for any regular contribution plan. They talk sweet and take their time.

June 12, 2017
11:12 am
Bill
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When all my kids were young Canadian Scholarship Foundation was pretty much the only choice. Now that there are better options I agree with those who say stay away from these group plans.

Also, be careful of the RESP rules re the grant, they can be a little different. For example, the most they'll ever pay out in any year (re the 20% grant) is $1K. So don't put in more than $5K in any year, that way you'll get $500 for the current year and $500 for a previous year when you didn't contribute - any more than $5K in a year will never qualify for a grant. As the max grant is $7.2K, you hit that at $36K of contributions, so in essence you could wait until the child is age 9 or so, then contribute the $5K a year until you hit the $36K and you'll get the max grant.

I know most people want to get going asap, sheltered income and all that, but just something to keep in mind: We all picture our babies going to university, etc but it doesn't always happen. One of my sons, from families on both sides where everybody goes on to "higher" education, decided in grade 12 or so he had no more interest in education (only thing is he didn't share that information), and then, despite a sterling academic record until about grade 12, spent 3 years having fun with the ladies and playing sports in university until they kicked him out, happily blowing much carefully laid aside money. He ended up feeling bad about that part, but we laugh about it now, he says I always told him to do what made him happy, even if it meant being a cowboy or a pirate (my wife was not impressed when she later heard that!), and all is well with everybody, he loves his work - and now he comes to me asking about RESPs for his 0 and 2 year-old, he says he doesn't care what area of brain surgery they pick for a career! But the point is his future ended up unfolding in a way no-one in the family ever would have predicted in a million years. So flexibility of any RESP plan would be a big priority for me if I was doing it again, though I believe that's not such an issue today as in the days when options were much less.

June 12, 2017
2:49 pm
aps
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thanks guys for all the knowledge 🙂

June 12, 2017
5:20 pm
jobsfolly
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aps, on both your topics --

Minimum balance to avoid fees at Questrade is I think $5000 still. If memory serves, RBC Direct Investing at least and also TD waive their fees if you have a pre-authorized contribution set up. The two big banks would work for mutual funds, which is what you'd get from a financial planner. At Questrade you do not have to pay any commission to buy ETFs, only to sell them. However obviously I can't speak to what that means with your income picture.

With regard to what Bill says, bear in mind the rules for RESPs get ridiculously convoluted. They're on the Canada Revenue Agency website so you can see for yourself. However, you can hold the account open for 35 years and if you have multiple kids, I'm pretty sure you can still transfer one kid's RESP amount to another kid in the event the first one doesn't go to college/university.

June 12, 2017
6:12 pm
Bill
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Here are the links to the CRA and the Canada Employment and Social Development sites where the convoluted rules can be seen:

http://www.cra-arc.gc.ca/tx/nd.....u-eng.html

https://www.canada.ca/en/employment-social-development/services/student-financial-aid/education-savings/resp.html

When I had some questions a while ago CRA didn't have all the answers, they said the RESP program is actually under some other department and they gave me another number to call where I did get better answers - maybe it was the department for the 2nd link above, I can't recall for sure.

You can transfer funds originally intended for one child to other children (some versions call it a "family plan"), just be sure at the time you originally open the RESP account that you set it up that way - I think most RESPs, though not all, now accommodate that.

June 14, 2017
8:25 pm
Norman1
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I think the RESP accounts themselves are CRA's responsibility. The RESP accounts can accept grants. Those grants are the responsibility of other government departments.

Employment and Social Development Canada (ESDC) handles applications from RESP providers for

  1. the Basic CESG, Additional CESG, and CLB grants for the federal government,
  2. the SAGES grant for the Saskatchewan government, and
  3. the BCTESG for the BC government.

Revenu Québec handles applications from RESP providers for the QESI grant for the Québec government.

Grant rules are all over the place. Some are a percentage of parent's contributions. Some are not.

For example, BCTESG grant is $1,200 one-time. Just open an RESP and apply between child's 6th and 9th birthdays. No parent contribution needed. sf-cool

June 15, 2017
5:46 am
Bill
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True, Norman1, anyone can open, be a subscriber for, an RESP account. There can be a number of RESPs for the same
child(ren). The subscribers just have to make sure that cumulatively they don't contribute more than the max allowed. The investment industry has been very adept at encouraging grandparents to open RESP accounts for their grandchildren.

Note that there is no tax on the return of contributions so it's possible (as an example) for someone to open a plan, contribute and then later when the child goes on to post-secondary education take their contributions back - as long as the contract for that RESP account allows for the return of contributions directly back to subscriber (the benefit is that the child will still get all the grant money plus any accumulated sheltered income). But as providers' contracts differ, again it's very important to make sure when you set up an account that the contract will allow you the flexibility to do what you ultimately intend to do - as contracts differ, don't assume.

June 18, 2017
11:10 am
Norman1
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Bill said
… But as providers' contracts differ, again it's very important to make sure when you set up an account that the contract will allow you the flexibility to do what you ultimately intend to do - as contracts differ, don't assume.  

I agree. The RESP contracts do differ and a particular RESP may not allow all the flexibility allowed.

An example of this are the EAP payments to the student that withdraw the grants and earnings from an RESP. The Income Tax Act allows up to $5,000 of the grants and earnings to be withdrawn for the first 13 weeks of studies and no limit after the 13 weeks.

The CST group RESP further restricts this to require the grants and earnings to be withdrawn over four yearly EAP payments. This is from page 30 of the Group Savings Plan 2001 prospectus:

As the EAPs are paid out in four installments, your Beneficiary will need to qualify for the installments over a four year period by enrolling in Eligible Studies. This does not necessarily mean a four year program, but could include any combination of programs or years that total four years. For example, your student could pursue four one-year programs or two two-year programs and collect the maximum number of EAPs. Beneficiaries who enroll in Eligible Studies of less than four years, or who do not pursue four years of Eligible Studies, will not qualify for the maximum number of EAPs and will receive a lower total amount of EAPs over the duration of their Eligible Studies than Beneficiaries who complete four years of study.

As well, page 24 discloses that the student being able to receive all four EAP's is a condition of getting back 50% of the sales charges:

The Foundation will refund 50% of the sales charges you paid for your Units if you make all required Contributions, your plan reaches maturity and your Beneficiary receives all four EAPs.

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