We’re here to Invest in You This Holiday Season
If you’re looking for a meaningful gift for the littles in your life, they’ll receive $200* towards a Registered Education Savings Plan when they become a new member.
What is a RESP?
A Registered Education Savings Plan (RESP) is a government assisted education savings account used to help individuals and families save for post-secondary education. The owner of the account, known as the subscriber, makes contributions to the RESP and must have a valid Social Insurance Number (SIN) when the account is opened.
Contributions and Taxable Earnings
RESP contributions are non-tax-deductible deposits that are subject to a lifetime limit of $50,000 per beneficiary. All contributions you make to the RESP belong to you. Government incentives and income earned in the RESP are sheltered from tax until they become available to the beneficiary when an Educational Assistance Payment (EAP) is made on their behalf. Although the EAP withdrawal is taxable income to the student, the good news is that they are usually in a low tax bracket resulting in little to no tax paid on the EAP withdrawal.
A RESP can hold the same investments that you purchase in a RRSP or TFSA. This includes cash, credit union shares, guaranteed investment certificates and mutual funds. Mutual funds are offered by SCCU. Effective March 22, 2017, the government will impose a penalty tax on you if your RESP holds a non-qualifying investment. Your credit union restricts RESPs to hold qualified investments only.
The government of Canada provides free money on contributions to RESP beneficiaries in the form of incentives to assist parents, families and friends save for post-secondary education. Incentives are paid to the RESP based on the amount of your contribution and limits imposed by the government.
Once the beneficiary has enrolled in full or part-time studies at a qualifying post-secondary educational institution, you may submit a request to withdraw money from the RESP to help pay for their studies. This type of withdrawal is called an Educational Assistance Payment (EAP). The EAP consists of the interest income portion of the RESP and the government incentives that have been credited to the beneficiary. The EAP is fully taxable to the beneficiary in the year of withdrawal.
If the beneficiary qualifies for the EAP, you may choose to take some, or all, of your contributions out of the RESP for yourself or gift the proceeds to the beneficiary. This type of withdrawal is called a Post-Secondary Education (PSE) withdrawal and is not taxable to you or the beneficiary, since contributions were made with your after-tax dollars. There is no limit to the amount of PSE that can be withdrawn from the RESP once the beneficiary goes to a qualifying post-secondary institution.
How Do You Get Started?
Please visit your local branch or book an appointment with an advisor to discuss how a RESP can help you reach your financial goals.
*Limited time only; offer ends Decemeber 31st, 2021.