Registered Education Savings Plan Dealers Say Enhancements to the RESP Will Encourage More Families to Save More for Their Children’s Post Secondary Education
TORONTO, ON – The Government of Canada’s proposed changes to RESPs and its popular Canada Education Savings Grant program are “a very positive leap forward for Canadian families”.
That’s the resounding verdict of the members of the Registered Education Savings Plan Dealers Association of Canada (RESPDAC), which represents four of the leading providers of RESP’s across the country. The proposed improvements were outlined in the federal Budget for 2007, released in Ottawa yesterday.
“We are extremely pleased with all of the proposed changes,” said Peter Lewis, newly-elected Chair of RESPDAC. “These improvements will benefit all Canadian families, and provide even greater incentive to invest in their children’s college or university education. And that’s good for everyone.
“We sincerely commend Finance Minister Flaherty and his advisors and staff for recognizing the value and importance of encouraging families to save for post-secondary education. We believe that it’s an integral part of a long-term strategy to improve access to higher learning, and we hope all federal political parties will support these provisions.”
Among the highlights of the budget, relating to post-secondary education, are:
- The $4,000 annual per-plan RESP contribution limit will be eliminated, and the lifetime RESP contribution limit (per child) will be increased to $50,000 from $42,000.
- The maximum annual RESP contribution qualifying for the 20-per-cent Canada Education Savings Grant (CESG) will be increased to $2,500 from $2,000, thus increasing the maximum CESG per beneficiary for 2007 and subsequent years to $500 from $400. The maximum CESG for a year will increase to $1,000 from $800 if there is unused grant room because of contributions of less than the maximum CESG-eligible contributions for previous years.
- A relaxation in eligibility rules to accommodate qualifying part-time students that do not meet the existing 10 hours per week study requirement, but require that at least 12 hours per month be spent on courses. Under this proposal, students 16 years of age or older will be able to receive up to $2,500 of benefits from their RESP for each 13-week semester of part-time study.
- Budget 2007 proposes to introduce a new non-refundable child tax credit for parents based on an amount of $2,000 (indexed) for each child under the age of 18 years at the end of a taxation year. This new tax credit will take effect beginning in 2007, and will provide personal income tax relief of up to $310 per child. This move will free up funds within families; we anticipate some of these funds will be set aside in an RESP for their children’s post-secondary education.
“Going to college or university has become a much greater priority for Canadian students over the last several years,” said Mr. Lewis. “In fact, a recent federal study estimated that more than 70 per cent of new jobs created in Canada now require some form of post-secondary education. But without years of savings – along with grants from the Government to augment those savings – the cost of post secondary education can be prohibitive for many students and their parents.”
According to Statistics Canada, the national average of university tuition and fees alone (not including residence and other living costs) is nearly $4,400 in Canada today. These costs can go up to more than $14,000 per year, when residence and other expenses are added. At a 5% rate of escalation, tuition and living expenses could increase to a total of over $120,000 for a child born today, and enrolling in a four-year university program in 2024.
“The proposed improvements in the federal Budget – especially the increase in the lifetime contribution limit – are fortunately recognizing this challenge,” Mr. Lewis said. “But as pleased as we are, our members will continue to push governments at both the federal and provincial levels to improve existing programs, and develop new ones, to enable more students to learn, compete, and contribute to a better Canada.”