Registered Education Savings Plan (RESP)
What it is
A Registered Education Savings Plan is a Canadian registered account for funding a beneficiary's post-secondary education. The account is opened by a "subscriber" (typically a parent or grandparent) on behalf of a "beneficiary" (the future student). Contributions are made with after-tax dollars; growth compounds tax-free inside the plan; withdrawals come out in two streams with different tax treatments.
The distinctive feature is the government match. The Canada Education Savings Grant (CESG) matches a percentage of contributions up to annual and lifetime caps — free money that isn't available from any other registered account.
Who can open one
Any Canadian resident with a SIN can be a subscriber. The beneficiary must be a Canadian resident with a SIN. Family plans allow multiple beneficiaries related to the subscriber by blood or adoption; individual plans name a single beneficiary (who doesn't need to be related).
How contributions work
No annual limit — the cap is $50,000 in contributions per beneficiary, tracked for life across all RESPs for that beneficiary. Contributions beyond the lifetime cap trigger a 1% monthly penalty on the excess.
The CESG matches 20% of contributions, up to $500 per beneficiary per year, with a lifetime grant cap of $7,200 per beneficiary. Unused CESG room from prior years carries forward, but the grant caps at $1,000 per year even when catching up. Lower-income families qualify for additional CESG at 10%-20% on the first $500 contributed each year, plus the Canada Learning Bond (up to $2,000 no-contribution grant for eligible children).
Tax treatment
Contributions are not deductible. Growth and government grants compound tax-free inside the plan. Withdrawals are split by source:
- PSE withdrawals (Post-Secondary Education) — return the original contributions to the subscriber, not taxable because they were post-tax dollars going in.
- EAP withdrawals (Education Assistance Payments) — send the growth and grants to the beneficiary, taxable in the beneficiary's hands. Since a typical student has little other income, the tax on EAPs is usually minimal or zero.
If the beneficiary doesn't pursue post-secondary education, the contributions come back to the subscriber tax-free, the growth can be rolled into the subscriber's RRSP (if they have room, up to $50,000), and the CESG is returned to the government.
How withdrawals work
Withdrawals require proof of enrollment in a qualifying post-secondary program. A first-term EAP is capped at $8,000 in the first 13 weeks of enrollment; after that, there's no ceiling per withdrawal.
PSE withdrawals have no receipt requirement beyond proof of enrollment. EAP withdrawals require the program to be a qualifying full-time or part-time post-secondary program.
If contributions exceed the lifetime cap, the 1% per-month penalty applies until the excess is withdrawn.