08/07 - W. Michael Thomas
CFP, CLU, CH.F.C., R.F.P

     Proposed Enhancements to the RESP Program

 
September means back to school and for some the scholastic journey of post-secondary education has begun.
 
The recent federal budget has proposed several enhancements to Registered Education Savings Plans (RESPs) and the Canada Education Savings Grant (CES Grant) program to help you grow an education fund to offset the future cost of education.  If passed into law, the changes would be effective the 2007.
 
Outlined below are the proposed changes:

	Present	Proposed
Maximum annual contribution	$4,000	No annual limit
Maximum lifetime contribution	$42,500	$50,000
Maximum lifetime CES Grant	$7,200	$7,200
Maximum Basic CES Grant (as a percentage of contributions)	20%	20%
Maximum annual contribution eligible for Basic CES Grant in current year	$2,000	$2,500
Maximum annual Basic CES Grant amount for current year	$400	$500
Total maximum annual contribution eligible for Basic CES Grant	$4,000	$5,000
Total maximum annual CES grant amount	$800	$1,000

Although the $7,200 lifetime maximum for the CES Grant remains unchanged, the proposal will allow a child to reach that lifetime maximum sooner and benefit from the additional time for growth.
 
Also, if your contributions in previous years were not sufficient to receive the maximum annual Basic CES Grant in each year, you can catch up in later years by making additional contributions.  However, only the first $5,000 of contributions to an eligible Child’s RESP in a given year will receive a 20% or $1,000 Basic CES Grant.
 
Remember, it’s never too early to begin making contributions to an RESP, ensuring that your child’s graduation day does not come with hefty debt.

W. Michael Thomas is a partner at the Investment Guild (a division of Groupworks Financial Corp.)