Discussion on article: Registered Education Savings Plan (RESP)-FAQs
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| Registered Education Savings Plan (RESP)-FAQs By: WHAT IS RESP? article.php?id=65 |
Posted on: 26-10-04 20:53:33
Article is located here: http://www.canadiandesi.com/article.php?SID=7&AID=65" rel="nofollow">LINK
The increase in CESG has been tabled by Joe Valpe and will indeed go into effect on Jan 1, 2005. The wording should be changed from it is expected to it is definite....
Please check out
You may wish to read Minister Volpe's News Release on the HRSD web site at
http://www.hrsdc.gc.ca/en/cs/comm/hrsd/news/2004/041008.shtml.
Thks BKB
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Get what you want by helping others get what they want
October 8, 2004
FOR IMMEDIATE RELEASE
The Government of Canada tables Canada Education Savings Act, creating the Canada Learning Bond
OTTAWA, ONTARIO—The Honourable Joe Volpe, Minister of Human Resources and Skills Development, tabled legislation in the House of Commons today to create the Canada Education Savings Act. The savings programs contained in the Act will help low- and middle-income families to begin saving for their children’s post-secondary education.
"Today's tabling of the Canada Education Savings Act will make a difference in the lives of millions of Canadian children,” stated Minister Volpe. “The Act signals the creation of the new Canada Learning Bond and substantial enhancements to the Canada Education Savings Grant (CESG) for low- and middle-income families. These measures will help families to turn their dreams for their children’s education into real savings.’’
To encourage families to set up a Registered Education Savings Plan (RESP), the Canada Learning Bond will provide $500 to children born on or after January 1, 2004 in families entitled to the National Child Benefit (NCB) supplement for the child, followed by up to 15 annual $100 entitlements for each year the family is entitled to the NCB supplement for the child. These entitlements could be worth up to $3,000 by the time the child reaches 18 years of age.
The legislation will also double the CESG from 20 to 40 percent on the first $500 of RESP contributions each year for families with a net income of $35,000 or less. The Bill will also increase the CESG from 20 to 30 percent on the first $500 of RESP contributions per year for families with a qualifying net income greater than $35,000 but not exceeding $70,000. While the Canada Learning Bond will benefit children born on or after January 1, 2004, all eligible children in low- and middle-income families stand to benefit from the improved CESG match rates effective on January 1, 2005.
Since its creation in 1998, the CESG has proved highly successful at encouraging parents to save for their children’s education with a total amount of savings in RESPs increasing from a little over $2 billion in 1997 to over $13 billion in 2004.
For more information on the proposed changes, please visit our Web site at the Canada Education Savings Grant
Backgrounder attached.
For more information:
Stephen Heckbert
Director of Communications,
Office of the Honourable Joe Volpe,
Minister of Human Resources and Skills Development
(819) 994-2482
Media Relations Office
Human Resources and Skills Development Canada
(819) 994-5559
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Get what you want by helping others get what they want
According to this new law, the grant can be as high as CAD 11,000
BKB
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Get what you want by helping others get what they want
The new CESG Act was tabled in the house for discussion on Oct. 8, 2004 but it has not been passed yet. That is why I used the word "expected".
The modified CESG Act has also proposed the creation of a Canada Learning Bond.
This has been done "to encourage families to set up a Registered Education Savings Plan (RESP), the Canada Learning Bond will provide $500 to children born on or after January 1, 2004 in families entitled to the National Child Benefit (NCB) supplement for the child, followed by up to 15 annual $100 entitlements for each year the family is entitled to the NCB supplement for the child. These entitlements could be worth up to $3,000 by the time the child reaches 18 years of age."
The benefit of the Learning Bond will be available only to RESP plan-holders. An additional free bonanza of $3,000.
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Man's Best Friend 
Assuming the following basis is as follows:
a) We came to Canada in 2000
b) We have not yet contributed to RESP
c) We have a child aged 10 yrs
We now intend to start contributing to RESP. Assuming the cash-flow permits, our plan for contribution is as follows:
(i) Contribute $2000 for each of the future years and get 20% grant on the same
(ii) Alongwith (i), contribute $2000 for each of the previous years and get 20% grant on the same
Query:
(A) Is the contribution for the previous years permissable till the yar that we landed in Canada (year of 2000) or go back till the start of he scheme (year 1998)?
(B) Also, is there any advantage / benefit in contributing over the ceiling amount of $2000?
Quote:
Orginally posted by hakuna
Assuming the following basis is as follows:
a) We came to Canada in 2000
b) We have not yet contributed to RESP
c) We have a child aged 10 yrs
We now intend to start contributing to RESP. Assuming the cash-flow permits, our plan for contribution is as follows:
(i) Contribute $2000 for each of the future years and get 20% grant on the same
(ii) Alongwith (i), contribute $2000 for each of the previous years and get 20% grant on the same
Query:
(A) Is the contribution for the previous years permissable till the yar that we landed in Canada (year of 2000) or go back till the start of he scheme (year 1998)?
(B) Also, is there any advantage / benefit in contributing over the ceiling amount of $2000?
Hi hakuna,
Very good questions indeed! Let me answer one by one.
(A) The CESG is only available to Canadian residents. In fact, if after being a resident, your child becomes a non-resident then he/she is not eligible for CESG for the period of non-residency. This rule, however, does not apply to persons like diplomats etc.
It is important to note that this restriction is not mandated under the Income Tax Act but applies only to the CESG. In other words, the RESP remains registered even if the child becomes a non-resident.
Answer to your question is that your child has been accumulating CESG from the year 2000 and not 1998.
(B) The answer is yes. I will illustrate this by taking an example of a newborn baby.
Case-1: The parents contribute $4,000 per year to RESP for 9 years. Total contribution is: $36,000
The CESG contribution to this plan would be $3,600.
Let us assume the money has been growing at 7% pa.
When the child turns 18 the RESP account would have: app $103,000
Case-2: The parents contribute $2,000 per year for 18 years (total: $36,000) and attract $7,200 CESG.
At the end of 18 years the RESP account would have: app $87,000.
Therefore, the child in Case-1 is a clear winner because the parents realized the importance of the mathematical magic of compounding.
(Note: These calculations are done assuming the payments are made at the beginning of the period)
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Man's Best Friend
thanks teja for the details. just a point for clarification.
pl. refer to my example for the years - some resp agents are assuring to give benefits from 1998. any idea how/why? ultimately, they would need to give me the cesg for those years - so, is there a likely gap in interpretation????
