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RESP Rules and Contribution Limits

A Registered Education Savings Plan (RESP) combines flexibility, tax-deferred investment growth and direct government assistance to help you reach the education goals you have for a child.

An RESP can be set up for any “beneficiary,” including your children, grandchildren, nieces, nephews or family friends. Each beneficiary must be a Canadian resident and have a Social Insurance Number (SIN), which can be obtained from a Service Canada Centre (www.servicecanada.gc.ca).

Contribute any amount to an RESP, subject to a lifetime contribution limit of $50,000 per beneficiary. You can contribute to an RESP for up to 31 years, and the plan can remain open for a maximum of 35 years.

Under the CESG, the government matches 20% on the first $2,500 contributed annually to an RESP, to a maximum of $500 per beneficiary per year. The lifetime maximum per beneficiary is $7,200, up to age 18. If you don’t contribute enough to qualify for the maximum $500 CESG in a given year, the unused entitlement can be carried forward to the next year. See RESP Grants and Bonds.

A $500 Canada Learning Bond (CLB) is provided for children of families who are of modest income and who are born after December 31, 2003. These children also qualify for CLB instalments of $100 per year until age 15, as long as they continue to meet income thresholds. The total maximum CLB payable per child is $2,000. CLBs are allocated to a specific child; unlike CESGs, they cannot be shared with other beneficiaries.

If you don’t contribute enough to qualify for the maximum $500 CESG in a given year, the unused entitlement can be carried forward to the next year.

There are two types of withdrawal scenarios:

Once a student is enrolled in a qualifying post-secondary education or training program, the funds within the RESP can be paid out to the student with proof of enrollment. Payments comprised of accumulated income, grants and bonds are called Educational Assistance Payments (EAPs) and the student must claim them as income on their tax return. Contributions can be paid out the beneficiary tax-free.

In this case, you can withdraw the initial contribution with no tax consequence since it was made with after-tax dollars. However, any CESG remaining in the plan must be repaid, to a maximum amount equal to 20% of the withdrawal.

If an RBC RESP can hold a variety of investments, including Guaranteed Investment Certificates (GICs), mutual funds, portfolio solutions and savings deposits. You can also hold stocks and bonds through RBC Direct Investing™ and RBC Dominion Securities.

When you invest in mutual funds through RBC Royal Bank, you gain access to excellent growth potential:

  • RBC Target Education Funds are a portfolio of RBC Funds and feature an asset mix that evolves over time, with a greater weighting in equities in the early years and a more conservative asset mix favouring fixed income investments as your child's target education date approaches.
  • The RBC Funds family includes many equity-based investments that work well for longer-term investment goals such as saving for a child’s education.

If an RESP beneficiary decides not to pursue post-secondary education, you have a few options.

  • If you have a family plan, some of the government incentives received can be used to fund the education payments to another beneficiary on the plan.
  • If you have an individual plan, you may be able to name an alternate eligible beneficiary.
  • If the beneficiary has reached age 21 and the plan is at least 10 years old, you can withdraw the earnings subject to a withholding tax and a 20% penalty tax unless transferred to an RRSP. The amounts withdrawn will be considered taxable income.

Looking for something else? See our FAQs.

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Invest in an RESP Purchase a Different Investment

Please consult your advisor and read the Fund Facts if you are considering purchasing mutual funds before investing. There may be commissions, trailing commissions, management fees and expenses associated with mutual fund investments. Mutual fund securities are not guaranteed or covered by the Canada Deposit Insurance Corporation or by another government deposit insurer. For funds other than money market funds, unit values change frequently. For money market funds, there can be no assurances that a fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in a fund will be returned to you. Past performance may not be repeated. Royal Mutual Funds Inc. is licensed as a financial services firm in the province of Quebec.
Financial planning services and investment advice are provided by Royal Mutual Funds Inc. (RMFI). RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.