RESP Government review

Registered Education Savings Plans (RESPs) have been around for a long time but back in 1998, the government introduced the Canada Education Savings Grant (CESG) which really catapulted the popularity and use of the RESP.

The Canada Education Savings Grant is a grant from the government given to those that contribute to a RESP.  For every dollar contributed to a RESP up to a $2500 maximum, the government will contribute 20 cents into the RESP plan through the CESG.

In 2007, the government enhanced the CESG program which provides a greater grant for lower income families.

Most recently, the government has conducted a statistical review of the RESP and CESG programs.  I’ll provide some highlights of the report but you can also download the full report here.

RESP Contributions and CESG payments

Families contributed $3.54 billion to their children’s RESPs in 2011. This represents an increase of $110 million over 2010, when they had contributed $3.43 billion.

Overall the introduction of the CESG has increased the use of RESPs as a savings vehicle for education.  As you can see, annual contributions into the RESP have steadily increased year after year and so has the annual CESG payments accordingly

Year

Annual RESP contributions ($Billions)

Annual CESG ($Billions)

1998

0.87

0.151

1999

1.57

0.291

2000

1.71

0.318

2001

1.87

0.348

2002

1.99

0.370

2003

2.06

0.389

2004

2.27

0.426

2005

2.46

0.470

2006

2.67

0.514

2007

2.99

0.579

2008

3.10

0.603

2009

3.18

0.627

2010

3.43

0.678

2011

3.54

0.703

Although any person can be named by a subscriber of an RESP to receive money for education after high school, the Annual Statistical Review only reports on those who have received any of the Government of Canada incentives to save in RESPs which are available to children 0 to 17 years of age.

Contributions per beneficiary

Not all families contribute to their RESPs each year. As of 2011, there were 3.02 million kids aged 0 to 17 years eligible for the CESG. Of this total, 2.31 million (77%) received contributions to their RESP and hence received the CESG.

Of the children who had contributions deposited into their RESPs:

  • Only about 12.6% of RESP beneficiaries received contributions greater than $2500
  • 38.8% received between $1,001 and $2,500 in contributions
  • 48.7% received less than $1,000 in contributions
  • 24.5% received $500 or less.

The average contribution per beneficiary ranged from a low of $1284 in 2002 to  high of $1463 in 2010.

RESP assets

RESP assets represent the total market value of all RESPs in Canada as of December 31 of each year.

Refer to image description below.

As you can see from the chart, the total amount of RESPs at the end of 1998 was $4.0 billion.  In 2011, the value of the RESP assets reached $31.6 billion, continuing the trend of steady growth.  There was only one year (2008), when the total value of RESPs decreased slightly due to the world financial crisis.

Stats summary for 2011

  • Total RESP assets = $31.6 Billion
  • Annual RESP contribution – $3.54 Billion
  • CESG Payments = $703 million
  • Total number of beneficiaries that have ever received a CESG = 4.26 million
  • Amount withdrawn from RESP for post secondary education = $2.07 billion
  • Number of people using RESPs to pay for Post Secondary education = 299,799
  • Average withdrawal per student $6,907

Overall, the RESP and CESG program has been incredibly successful by all measures.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace.For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

One Response to RESP Government review

  1. I found it interesting that 12.6% received contributions of greater than $2500. That’s the amount contributed during 1 year, I think? We’d be part of that 12.6% if it is, because we are trying to catch up on our children’s RESPs.

    I was pleased to see your other article “RESP carryforward rules” makes it clear you can re-gain some of the CESG for past years. My bank didn’t tell me this! I found out for myself, just in time for a year end contribution, that you can actually contribute up to $5000 per year and get the matching CESG 20% grant provided you have contribution room left from previous years. So now if we can afford to, we are contributing up to $5000 per year per child to catch up on the early years when we couldn’t afford to contribute.

    I hope you are able to maximize your children’s RESPs, too!

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