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In this post you will enjoy reading more about the factors used to evaluate various savings plan. This includes considering the risk capacity, the interest rate returns, the duration of the investment, the ultimate goals associated with the savings plan, the highlights, flexibility of the savings plan and the prices of the savings plan to evaluate the savings plan. These factors are vital because these will help you to evaluate a good and a successful savings plan. In addition to this you will also learn about the advantages of choosing the savings plan. You would enjoy reading throughout my post as it would help you acquire the necessary knowledge that will help you the next time when choosing a savings plan.

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Video #1 - The Best interest rates and the risk consideration

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Video #1 - The Best interest rates and the risk consideration

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This video explains where you should invest your money to get back the best interest rates for your savings plan. One of the safest place to deposit your money is the EQ Bank which could offer you up to 2.50% of interest rate. In addition to this you could also consider depositing money in CI Direct Investing savings account which would provide you a interest rate up to 4% with no annual fee and minimum balance. The next one could also be Wealthsimple cash account followed by KOHO High interest savings account, BMO Savings Account and more as explained in the video. One must always check the interest rates and should also consider the risk factors associated with the savings plan.

I have chosen this video as it explains two factors that are used to evaluate the savings plan that is the interest rates and the risk consideration. These acts as a vital factor because we invest to get back high returns but would also prefer a safe depositing account. The piece of information I found useful is the list of banks he explains in the entire video.

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The BEST High Interest Savings Accounts in Canada

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This video explains types of savings account you should consider investing. Your goals decide which savings account you should choose. The first one being TFSA which is a tax free savings account offering you a interest rate up to 2.5% which is also taxable. This savings accounts provides you a high rate of return when compared to other savings account. The next one is HISA which stands for High Interest Savings Account offering you a 2.3% interest. This saving account is best for your short term savings plan which can be used as a emergency or a sinking fund also helping you to keep up with the inflation. There is no limit for the deposit you choose to invest. The video also explains more about the RRSP and other savings account which would be best choice for you.

I chose this video as choosing the types of saving account is considered as an important factor while evaluating the savings plan. The piece of information I found useful is various accounts we can consider to get back a high return on our savings plan.

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Which Savings Account Is Right For You? - Different types of Canadian Savings Accounts

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Video #3 - The advantages and disadvantages of investing in a savings plan.

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Video #3 - The advantages and disadvantages of investing in a savings plan.

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The video explains about the pros and cons of investing in a savings account. The first advantage of investing in a savings account is that it is a safe form of deposit, risk free investment , you can withdraw the money at any time unless you have not locked it for a specific time. The video also explains the cons of the savings account in which the first one being the tax on the investment, lower interest rates when compared to other types of investments, higher interest rates is possible only if you lock your savings which would reduce the flexibility.

I found this video useful because its very important to know about the advantages and the disadvantages while considering depositing money in your savings account because there are many other types of investments which would allow you to increase your money. The information I found useful is that I didn't know we can withdraw the money whenever we need if we have not locked it.

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Advantages and disadvantages of a savings account with interest

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Video #4 - The ultimate goals of the savings plan. 

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Video #4 - The ultimate goals of the savings plan. 

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The video explains the five steps that is necessary to reach the ultimate goals of the savings plan. The first step includes naming your goal. It can be either buying a house or maybe a car. The second step includes setting a end date to reach your target goal. The third step includes creating a separate account for each saving goals as it would help you to measure the cash. The fourth step includes deciding the budget that is figuring out how much you can save. The fifth step includes setting the automatic transfer for your savings plan. Following these steps would help you to accomplish your ultimate goals.

I have chosen this video because it explains one of the factor necessary to evaluate the savings plan which is called as the ultimate goal. This video is better than the other videos because the video is short and the explanation is clear. The information I found useful is the steps explained to reach the ultimate goals by setting a savings plan.

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How To Reach Your Savings Goals In Five Steps | Marcus by Goldman Sachs

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Website #1 - What to consider while choosing a savings plan

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Website #1 - What to consider while choosing a savings plan

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This website explains the consideration you must note while choosing a savings account and the taxes you are supposed to pay for it , how do you access you money from the savings account and how the interest is calculated. The first thing to consider is the minimum deposit you must keep followed by the service fees and the interest rates. You should also choose the savings account that would allow you to withdraw and transfer money when required. The interest is usually calculated on how much money you deposit and then you must also know that you have to pay the tax on the interest you earn each year.

I have chosen this website is because it gives answers to all my questions and the information I found useful in this website is how the financial institution calculates interest rates on our savings account.

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A savings account is an account that pays interest on the money you deposit, also known as the principal. Many people who open a savings account also have a chequing account for their day-to-day banking.

What to consider when choosing a savings account

When shopping around for a savings account, pay attention to the following features and considerations.

Minimum deposit

You may need to deposit a minimum amount to set up certain savings accounts.

Some accounts may need you to keep a certain amount of money in the account to earn interest. For example, in some cases you might need to keep at least $1,000 in the account before it pays interest.

Interest rates

You earn interest on the money in your savings account. Each month, any interest you earn will go directly into your account. The higher the interest rate, the more money you'll earn. Consider how much interest, if any, your financial institution will pay on your account balance.

Sometimes a financial institution may offer high-interest introductory rates. These run for a certain length of time. After the period is up, the interest rate may then be lower.

Make sure that you:

will still earn a good rate after the introductory period ends

understand the terms of such offers

Service Fees

You don't usually pay monthly fees to have a savings account.

You may still have to pay fees for transactions such as withdrawals or transfers. Most savings accounts offer a limited number of transactions. Some savings accounts won't charge you transactions fees if you keep a minimum monthly balance.

Read your account agreement and find out what the service fees are for withdrawals and transfers.

Use the Account Comparison Tool to find the savings account that best suits your needs.

Accessing the money in your savings account

A savings account usually offers quick and easy access to your money for withdrawals and transfers.

If you use your account mainly to save money, you'll likely only need to make transactions from time to time.

If you need to withdraw money from your account, consider the following:

can you access your money from a nearby automated teller machine (ATM)

can you manage your account using online banking

If you have to transfer money from your savings account to a chequing account before you can withdraw, it may take extra time to access the money.

How your financial institution calculates interest

Carefully examine the terms of the account to find out how your financial institution will apply interest. Some financial institutions apply two or more different interest rates to your balance.

Find out if your financial institution will pay the higher interest rate:

on all the money in your account

on all the money in your account only once your savings go above a certain amount

only on the part of your balance that is above a certain amount

For example:

Bank 1 might pay:

1% on the first $1,000 of your balance, and

2% on amounts more than $1,000

Bank 2 might pay:

2% interest to the entire amount of your balance as long as you keep at least $1,000 in your account

Bank 3 might not pay interest during a month where you take out money.

Compound interest

With compound interest, your initial deposit, or principal, earns interest. The money you earn in interest is added to your savings. You'll continue to earn interest on your total savings. This means the interest you earn will earn interest. The more often your interest is compounded, the more your account balance will grow.

Financial institutions usually advertise a compound interest rate for a savings account.

Usually the advertised interest rate is annual. However, accounts may compound interest monthly or daily. Accounts that compound interest daily earn interest faster than accounts that compound interest monthly.

Ask your financial institution how often it compounds the interest paid to your account.

Example of how compound interest works

Suppose you deposit $100 into your savings account every month. Your money starts to earn interest as soon as you deposit it. Your account has an annual interest rate of 2%, compounded monthly.

This means that, each month, you'll earn about 0.167% (which is 2% divided by 12 months) on your balance. This includes any interest paid in the previous months.

After one month, you have $100 in your account and will earn only $0.17 interest on that balance ($100 x 0.167%). After the second month, your interest will be calculated based on the $200 you've deposited, plus the $0.17 interest earned in the first month.

On a balance of $200.17, you'll earn $0.33 in interest ($200.17 x 0.167%).

Each month, the amount of interest you earn will increase. By the end of the first year, you'll earn a total of $13.08 in interest.

The longer you continue to save and earn compound interest, the faster your savings will grow.
Figure 1: How compound interest adds up over time as you make more deposits into your account.

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banking; consumer protection; personal finance; financial institutions; fees; interest rates; banks; savings; taxes

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A savings account is an account that pays interest on the money you deposit, also known as the principal. Many people who open a savings account also have a chequing account for their day-to-day banking. When shopping around for a savings account, pay attention to the following features and considerations.

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Website #2 - The various savings account in Canada

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Website #2 - The various savings account in Canada

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This website provides the best savings account with the high interest rates. The EQ bank provides a interest rate of 3% with no monthly fees and would be considered as the best type of savings account. The next one would be the HSBC offering a total annual interest rate of 6.35% on new deposits which have been started from October 16,2023 and would continue till January 12, 2024 , CIBC giving you a 6% interest rate on your savings bank for your first 5 months including the date considerations and many more banks offering you a desired rate on your savings account you might want.

I have chosen this website because it provides a detailed comparison of various banks and all the details under a single sheet. The information I found useful was the different banks that provides different interest rates on our savings account.

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Compare the best savings accounts - by type

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Best savings accounts - Compare savings accounts in Canada | Ratehub.ca

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Compare the best savings accounts in Canada with the highest rates and money-saving perks, and boost your bottom line.

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Website #3 - The factors that influence the savings plan.

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Website #3 - The factors that influence the savings plan.

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This website explains the various factor we must consider while evaluating the savings plan. The first on would be look at the one that would provide us a higher interest rate followed by the income you get, the growth of the economy. In addition to this , it also depends on your age , the trends of the culture , how much wealth you possess and the inflation in the Canadian economy.

I have chosen this website as it provides the correct determinants required to evaluate the savings plan. I found all the information posted in this website useful as all these factors are very important.

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Household saving is defined as income that is not consumed. Savings can be kept in cash form, saved in a bank account or saved in long-term assets, such as government bonds.

Quick summary of factors that influence saving levels

Interest rates - higher interest rates make saving more attractive.

Rising income enables higher savings. People on very low incomes cannot afford the luxury of saving

Economic growth - high growth and high consumer confidence encourage relatively higher spending and a fall in the savings ratio.

The age of individuals - People in their 40s and 50s tend to save for retirement. Old people run savings down.

Cultural trends - some cultures have a stronger 'saving culture' - others pursue higher spending and borrowing.

Wealth - Rising house prices increase household wealth and diminish the need to save in other forms.

Inflation - high inflation may discourage cash saving, but encourage the purchase of fixed assets.

There are two ways of measuring saving levels

1. Total (gross) saving levels

2. Saving ratio - the percentage of income that is saved.

Factors influencing saving levels
1. Interest rates
Higher interest rates mean that households will gain a higher rate of return on depositing savings in a bank. At interest rates of 1%, a £1,000 bank account, will only get £10 a year interest. If interest rates rise to 6%, then the interest payments will rise to £60 - giving a relatively higher return on savings. Ceteris paribus, higher interest rates should encourage saving.

However, it is not straightforward - interest rates can be offset by other factors. For example, in the recession of 2009, interest rates were cut to 0.5%, but this did not reduce saving ratios, saving ratios increased because consumers were pessimistic about the future.

Also, there is an income and substitution effect. Higher interest rates make saving more attractive than consumption, but on the other hand, there is an income effect - if interest rates rise, then a saver can get their target interest payments with a lower level of savings. It is not certain that higher interest rates will encourage individuals to save more. See more - How do interest rates affect saving levels?

Also, another issue is the inflation rate. If interest rates are 15%, but inflation is 16%, then saving money in a bank gives a negative interest rate and there is less incentive to save. If interest rates are 3%, but inflation 0%, then there is a positive real interest rate of 3%.

2. Income levels/Economic growth
Rising income levels will lead to a rise in total saving levels. As households gain more disposable income and have the ability to save more. However, periods of economic growth can also create optimism and confidence amongst consumers and encourage a relatively higher percentage of consumption. When households expect rising incomes, then they are more likely to borrow to finance luxury goods and cut back on spending.

If we look at the UK household saving ratio, then it appears the saving ratio is cyclical.

During the 1980s, the saving ratio fell during the "Lawson Boom" - but then rose during the 1990-92 recession.

The saving ratio then fell during the long period of economic expansion (Great moderation). Then in the 2008/09 recession, the saving ratio shot up.

This suggests that the economic cycle has a clear effect on the savings ratio - during a recession - the saving ratio rises - during growth, the saving ratio falls.
3. Income distribution
Typically households on low income will have very low saving levels. They need to buy necessities and do not have the 'luxury' of being able to save. As incomes rise, households tend to have a higher marginal propensity to save. This is because with higher incomes there is a diminishing marginal utility to consumption - households with extra income are more likely to save it. If there is a rise in incomes of the low paid, this will have a bigger impact on increasing savings than if there is a rise in incomes of the wealthy. A reduction in inequality can increase saving levels.
4. Wealth
In a period of rising asset prices, households may feel less necessity to save. For example, a rise in house prices leads to an increase in wealth, that homeowners can access through mortgage equity withdrawal. In the 1980s and early 2000s, there was a significant rise in house prices which increased the wealth of homeowners - this gives households more confidence to reduce saving levels.
5. Confidence
Confidence and expectations of the future have a large bearing on saving. If households are optimistic about the future, they are more willing to borrow and run down savings. But, if confidence is low, then it is an incentive to save for unexpected problems. Factors that will influence economic confidence are closely related to the current economic climate, e.g. the rate of economic growth, unemployment levels, house prices.

Euro area - household saving ratio and consumer confidence

Data from the EU shows a strong link between consumer confidence and saving ratios.
6. Demographics/Age distribution
Life cycle theories of consumption argue that individuals try to smooth consumption over a lifetime. During a person's student years, they will typically borrow (student loans), then in their 40s and 50s, with high income, they will save. Then during retirement, they will run down their savings. An ageing population can lead to a fall in the saving ratio.

However, there is no guarantee that retired people will run down savings. They may wish to pass savings on to their children or feel they will live a very long time.
7. Unexpected events

In 2019, the savings ratio was very low due to falling real wages and pressure on households. But, all that changed with the Covid lockdowns of 2020. Unable to spend money on many usual activities, most households saw a surge in household savings. When the economy reopened in 2021, households spent strongly and released the pent-up savings and demand.
8. Inflation
Inflation can have an effect on saving. If there is high inflation - and if inflation is higher than interest rates, then this will discourage saving. Households may look to either spend money before it falls in value or buy assets which hold their value during inflation.

However, in the 1970s, inflation increased, yet the UK saving ratio rose. This is partly a reflection that towards the end of the 1970s, interest rates were increased to maintain a positive real interest rate.

Also high inflation can create uncertainty and confusion and discourage consumers from taking risks such as taking out a loan. Inflation can be the uncertainty that encourages greater saving - so long as there are worthwhile places to save the money.

9. Cultural factors
Saving rates can vary between countries. It can reflect attitudes to borrowing, saving and social expectations. For example, thrift and saving can be seen as highly desirable in Germany - where there is a greater aversion to debt. The UK has a greater willingness to borrow and run down savings.

Saving rates by country

Net Saving rates

Source: OECD, 2011.

This shows a big divergence in saving rates between countries.
Related

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Factors that influence saving levels - Economics Help

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Household saving is defined as income that is not consumed. Savings can be kept in cash form, saved in a bank account or saved in long-term assets, such as government bonds. Quick summary of factors that influence saving levels Interest rates - higher interest rates make saving more attractive. Rising...

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This website provides a detail explanation of the RESP which stands for Registered Education Savings Plan. The website has clearly explained what a RESP is , its contribution limits and advantages and more. RESP is also a best savings account to consider as it saves for a child's post secondary education which maybe a full time or a part time studies at a college or a university. It's grants 20% on the first $2500 and the percentages depending on the money you deposit. The subscriber is supposed to pay 1% per month tax on the excess contribution made. The further reading of the website will provide you a clear understanding of the RESP savings plan.

I have chosen this website because we have to evaluate different savings plan in order to choose the correct savings plan to deposit our money. The information I found useful is the grants that the government provides depending on the money we invest.

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RC4092(E) Rev. 23

The CRA's publications and personalized correspondence are available in braille, large print, e-text, and MP3. For more information, go to Order alternate formats for persons with disabilities or call 1-800-959-8281.

Find out if this guide is for you

Use this guide if you want information about the registered education savings plans (RESP). This guide has information which is not in the income tax and benefit package and which you may need to fill out your income tax and benefit return. We have included definitions for some of the terms used in this guide in the Definitions sections. You may want to read this section before you start.

La version française de ce guide est intitulée Les régimes enregistrés d'épargne-études (REEE). Unless otherwise stated, all legislative references are to the Income Tax Act or, where appropriate, the Income Tax Regulations.

Definitions

This section provides a general definition of the technical terms that we use in this guide.

Advantage - any benefit, or debt that is conditional on the existence of the RESP, subject to certain exceptions for normal investment activities and conventional incentive programs.

An advantage also includes any benefit that is an increase in the total fair market value (FMV) of the property of the RESP that is reasonably attributable to any one of the following:

a transaction or event (or series) that would not have occurred in a normal commercial or investment context between arm's length parties acting prudently, knowledgeably, and willingly, and one of the main purposes of which is to benefit from the tax-exempt status of the RESP

a payment received in substitution for a payment for services rendered by the subscriber (or non-arm's length person) or for a return on investment on non-registered property

a swap transaction

specified non-qualified investment income that has not been paid from the RESP within 90 days of the subscriber receiving a notice from CRA requiring removal

An advantage also includes a registered plan strip or any benefit that is income or a capital gain that is reasonably attributable to one of the following:

a prohibited investment

an artificial diversion of an amount away from the RESP

For more information on advantages, see Income Tax Folio S3-F10-C3, Advantages- RRSPs, RESPs, RRIFs, RDSPs, and TFSAs.

Adjusted family net income - this is your family net income minus any Canada child benefit and registered education savings plan (RESP) income received plus any Canada child benefit and RESP amounts repaid.

Arm's length - refers to a relationship or a transaction between unrelated persons who act in their separate interests. An arm's length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.

Common law partner - a person who is not your spouse, with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. The person:

has been living with you in a conjugal relationship, and this current relationship has lasted for at least 12 continuous months

Note

In this definition, "12 continuous months" includes any period that you were separated for less than 90 days because of a breakdown in the relationship.

is the parent of your child by birth or adoption

has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support

Fair market value (FMV) - is generally considered to mean the highest price expressed in terms of money that can be obtained in an open and unrestricted market between informed and prudent parties, who are dealing at arm's length and under no compulsion to buy or sell. For information on the valuation of securities of closely held corporations, see Information Circular IC89-3, Policy Statement on Business Equity Valuations.

Non-arm's length - generally refers to a relationship or transaction between persons who are related to each other. However, a non-arm's length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances.

For more information, see the definition of Arm's length.

Non-qualified investment - any property that is not a qualified investment for the RESP trust. For more information on non-qualified investments see Income Tax Folio S3-F10-C1, Qualified Investments - RRSPs, RESPs, RRIFs, RDSPs, and TFSAs.

Prohibited investments - this is property to which the RESP subscriber is closely connected. It includes any of the following:

a debt of the subscriber

debt or share of, or an interest in, a corporation, trust, or partnership in which the subscriber has a significant interest (generally a 10% or greater interest, taking into account non-arm's length holdings)

a debt or share of, or an interest in, a corporation, trust, or partnership with which the subscriber, does not deal at arm's length

A prohibited investment does not include a mortgage loan that is insured by the Canada Mortgage and Housing Corporation or by an approved private insurer. It also does not include certain investment funds and certain widely held investments which reflect a low risk of self-dealing.

For more information on prohibited investments, see Income Tax Folio S3-F10-C2, Prohibited Investments - RRSPs, RESPs, RRIFs, RDSPs and TFSAs.

Registered education savings plan (RESP) - a registered contract between an individual (the subscriber) and a person or organization (the promoter). The subscriber generally makes contributions to the RESP, which earns income, paid in the form of educational assistance payments to one or more identified beneficiaries.

Registered plan strip - the amount of a reduction in the FMV of property of the RESP, if the value is reduced as part of a transaction or event (or series) for which one of the main purposes is to enable the subscriber (or non-arm's length person) to obtain a benefit in respect of the property of the RESP or to obtain a benefit as a result of the reduction. Exceptions are provided for plan distributions that are included in income, or specifically excluded from income (such as a tax-deferred transfer between plans).

For more information on a registered plan strip, see Income Tax Folio S3-F10-C3, Advantages - RRSPs, RESPs, RRIFs, RDSPs, and TFSAs.

Related persons - are not considered to deal with each other at arm's length. Related persons include individuals connected by blood relationship, marriage, common-law partnership, or adoption (legal or in fact). A corporation and another person or two corporations may also be related persons.

Specified non-qualified investment income - any income (excluding the dividend gross-up), or a capital gain that is reasonably attributable, directly or indirectly, to an amount that is taxable for any RESP of the subscriber (for example, subsequent generation income earned on non-qualified investment income).

Spouse - a person to whom you are legally married.

Swap transaction - any transfer of property between the RESP and its subscriber (or non-arm's length person). Exceptions are provided for contributions to and distributions from the RESP, purchase and sale transactions between the RESP and another RESP of the subscriber, and transactions relating to insured mortgages.

For more information on swap transactions and applicable transitional rules, see Income Tax Folio S3-F10-C3, Advantages - RRSPs, RESPs, RRIFs, RDSPs, and TFSAs.

Unrelated persons - may not be dealing with each other at arm's length at a particular time. Each case will depend upon its own facts. The following criteria will be used to determine if the parties to a transaction are not dealing at arm's length:

whether there is a common mind that directs the bargaining for the parties to a transaction

whether the parties to a transaction act in concert without separate interests; ("acting in concert" means, for example, that parties act with considerable interdependence on a transaction of common interest)

whether there is de facto control of one party by the other because of, for example, advantage, authority, or influence

For more information, see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length.

What is a Registered Education Savings Plan

A registered education savings plan (RESP) is a contract between an individual (the subscriber) and a person or organization (the promoter).

Under the contract, the subscriber names one or more beneficiaries (the future student(s)) and agrees to make contributions for them, and the promoter agrees to pay educational assistance payments (EAPs) to the beneficiaries.

Family plans are the only RESP that allow subscribers to name more than one beneficiary. Each beneficiary must be connected by blood relationship or adoption to each living subscriber or have been so tied to a deceased original subscriber.

The Canada Revenue Agency registers the education savings plan contract as an RESP, and lifetime limits are set by the Income Tax Act on the amount that can be contributed for each beneficiary (see RESP contribution limits). Unless the RESP is a specified plan, the RESP must provide that no contributions (except transfers from another RESP) may be made to the plan at any time after the end of the year that includes the 31st anniversary of the opening of the plan. Furthermore, the plan has to be completed by the end of the year that includes the 35th anniversary of the opening of the plan.

The subscriber (or a person acting for the subscriber) generally makes contributions to the RESP. Subscribers cannot deduct their contributions from their income on their income tax and benefit return.

The promoter usually pays the contributions, and the income earned on those contributions, to the beneficiaries. The income earned is paid as EAPs.

For more information on EAPs, go to Educational assistance payments.

If the contributions are not paid out to the beneficiary, the promoter usually pays them to the subscriber at the end of the contract. Subscribers do not have to include the contributions in their income when they get them back.

Beneficiaries generally receive the contributions and the EAPs from the promoter. They have to include the EAP s in their income for the year in which they receive them. However, they do not have to include the contributions they receive in their income.

Specified plan

A specified plan is essentially a single beneficiary RESP (non-family plan) under which the beneficiary is entitled to the disability tax credit for the beneficiary's tax year that includes the 31st anniversary of the plan. Furthermore, a specified plan cannot permit another individual to be designated as a beneficiary under the RESP at any time after the end of the year that includes the 35th anniversary of the plan.

In addition, no contributions (except transfers from another RESP) may be made to the plan at any time after the end of the year that includes the 35th anniversary of the plan, and the plan must be completed by the end of the year that includes the 40th anniversary of the plan.

The following diagram gives an overview of how an RESP generally works.

Canada Education Savings Grant

The Government of Canada encourages the use of registered education savings plans (RESP) to save for a child's post-secondary education, which includes full or part-time studies at a trade school, CEGEP, college, university, or in an apprenticeship program.

Employment and Social Development Canada (ESDC) administers two education savings incentives linked to RESPs, the Canada Education Savings Grant and the Canada Learning Bond.

The Canada Education Savings Grant (CESG) consists of a basic grant of 20% on the first $2,500 in annual personal contributions to an RESP (this grant is available to all eligible children regardless of their adjusted family net income), as well as the additional amount of CESG, which is:

10% on the first $500 of annual personal contributions for children from families with an adjusted family net income between $53,359Footnote * and $106,717Footnote *

20% on the first $500 of annual personal contributions for children from families with an adjusted family net income of $53,359Footnote * or less

The CESG is available until the calendar year in which the beneficiary turns 17, and the maximum lifetime amount, including the additional amount of CESG, is $7,200.

The following chart gives you a brief overview of how the CESG is calculated depending on the adjusted family net income:

Adjusted family net income for 2023

$50,539 or less

more than $50,539 but less than $106,717

more than $106,717

Additional amount of CESG on the first $500 of annual RESP contributions

20% = $100

10% = $50

Beneficiary is not eligible

Basic CESG on the first $2,500 of annual RESP contributions

20% = $500

20% = $500

20% = $500

Maximum yearly CESG depending on income and contributions

$600

$550

$500

Lifetime maximum CESG for which you may qualify

$7,200

$7,200

$7,200

Every child under age 18 who is a resident of Canada will accumulate $400 (for 1998 to 2006) and $500 (from 2007 and subsequent years) of unused CESG room. Unused CESG room is carried forward and used when RESP personal contributions are made in future years provided that the specific contribution requirements for beneficiaries who attain 16 or 17 years of age are met.

Beneficiaries qualify for a grant on the contributions made on their behalf up to the end of the calendar year in which they turn 17 years of age.

However, since the CESG has been designed to encourage long term savings for post-secondary education, there are specific contribution requirements for beneficiaries who attain 16 or 17 years of age. Beneficiaries who are 16 or 17 years old may be eligible to receive the CESG if at least one of the following two conditions is met:

a minimum of $2,000 was contributed to (and not withdrawn from) the RESP of the child before the end of the calendar year the beneficiary turned 15

a minimum annual contribution of $100 was made to (and not withdrawn from) the RESP in at least four of the years before the end of the calendar year the beneficiary turned 15

This means that you must start to save in RESPs for your child before the end of the calendar year in which your child turns 15 years of age in order for your child to be eligible to receive the CESG.

The CESG and accumulated earnings will be part of the EAPs paid out of the RESP to the beneficiary.

If the beneficiary does not pursue post-secondary education, the CESG is returned to the government.

Canada Learning Bond

Employment and Social Development Canada (ESDC) provides an additional incentive of up to $2,000 to help low-income families start saving early for their child's education after high school (post-secondary education).

The Canada Learning Bond (CLB) money will be deposited directly into the child's RESP.

The CLB is available for eligible children from low-income families born in 2004 or later and provides an initial payment of $500 for the first year the child is eligible, plus $100 for each additional year of eligibility, up to age 15, for a maximum of $2,000. Personal contributions are not required to receive the CLB. To help cover the cost of opening an RESP, ESDC will pay $25 into the RESP to which the initial CLB of $500 is deposited in recognition of a one-time incidental expense that may be associated with opening the RESP account.

Children who are in care of a public primary caregiver for whom a special allowance under the Children's Special Allowance Act is paid, are also entitled to the CLB.

Youth who meet the minimum age requirement to open an RESP in their province of residence can be their own subscriber of an RESP and request the CLB for themselves.

The beneficiary must be under the age of 21 at the time of application.

If the beneficiary does not pursue post-secondary education, the CLB is returned to the government.

For more information on the CLB, call 1-800-O-CANADA (1-800-622-6232).

Quebec Education Savings Incentive (QESI)

The Quebec education savings incentive (QESI) is a tax measure that encourages Quebec families to start saving early for the education of their children and grandchildren.

The incentive, which came into effect on February 21, 2007, consists of a refundable tax credit that is paid directly into an RESP opened with an RESP promoter that offers the QESI.

For the credit to be paid to your account, the trustee designated by your RESP promoter must apply for it with Revenu Quebec .

If you wish to open an RESP, you may contact an RESP promoter that offers the QESI, such as any of the following:

a financial institution

a group plan dealer

a financial service provider

For more information, go to Revenu Quebec or call Service Quebec at 1-800-267-6299.

BC Training and Education Savings Grant Program (BCTESG)

Families in British Columbia are encouraged to start planning and saving early for their children's post-secondary education or training program. To help, the B.C. Government will contribute a grant of $1,200 to eligible children through the BCTESG.

To be eligible for the BCTESG, a child must meet the following three criteria:

the child was born in 2006 or later

at the time of application, the child and a parent/guardian of the child are residents of British Columbia

at the time of application, the child is the beneficiary of an RESP with a participating financial institution

Children are eligible for the BCTESG on their sixth birthday up until the day before their ninth birthday.

For more information, go to Province of British Columbia or call the Canada Education Savings Program at 1-888-276-3624.

2023 legislative changes

Divorced or separated individuals who are both legal parents can jointly open RESPs for one or more of their children, or move an existing joint RESP to another promoter.

If you are both legal parents of the beneficiary, you and your former spouse or common-law partner can be joint subscribers under an RESP.

Except for family plans, generally, there are no restrictions on who can be the original subscriber under an RESP:

you and your spouse or common-law partner, as defined in our guides, can be joint original subscribers under an RESP

a public primary caregiver of a beneficiary under an RESP may also be an original subscriber. A public primary caregiver is one who receives a special allowance under the Children's Special Allowances Act and may be either of the following:

the department, agency, or institution that cares for the beneficiary

the public trustee or public curator of the province in which the beneficiary resides

If you are not the original subscriber, you can become a subscriber only if one of the following situations applies:

you are a spouse or common-law partner, or ex-spouse or former common-law partner, of a subscriber and you get the subscriber's rights under the RESP as a result of a court order or written agreement for dividing property after a breakdown of the relationship

you are another individual or another public primary caregiver who has, under a written agreement, acquired a public primary caregiver's rights as a subscriber under the RESP

you acquired the subscriber's rights under the RESP, or you continue to make contributions into the RESP for the beneficiary, after the death of a subscriber under the RESP

you are the deceased subscriber's estate that acquired the subscriber's rights under the RESP, or that continues to make contributions into the RESP for the beneficiary, after the death of a subscriber under the RESP

All subscribers under an RESP have to give their social insurance number (SIN) to the promoter before CRA can register the RESP. Where the subscriber is a public primary caregiver, we request that they provide the promoter with their business number.

Designating a beneficiary

You can designate an individual as a beneficiary under the RESP only if both of the following conditions are met:

the individual's SIN is given to the promoter before the designation is made

the individual is a resident of Canada when the designation is made

Notes

An education savings plan may permit a non-resident individual who does not have a SIN to be designated as a beneficiary under the plan provided that the designation is being made in conjunction with a transfer of property into the plan from another RESP that was entered into before 1999 and under which the individual was a beneficiary immediately before the transfer.

A beneficiary under a family plan entered into after 1998, must be less than 21 years of age at the time they are named as a beneficiary. When one family plan is transferred to another, a beneficiary who is 21 years of age or older can still be named a beneficiary to the new RESP.

RESP contributions

You will be able to make contributions for a beneficiary only if one of the following two conditions is met:

the beneficiary's SIN is given to the promoter before the contribution is made and the beneficiary is a resident of Canada

the contribution is made by way of a transfer from another RESP under which the individual was a beneficiary immediately before the transfer

Note

If the plan was entered into before 1999, the beneficiary's SIN will not be required. However, such contributions will continue to be ineligible for the Canada Education Savings Grant (CESG).

Generally, you can contribute to family plans for beneficiaries who are under 31 years of age at the time of the contribution. However, transfers can be made from another family plan even if one or more of the beneficiaries are 31 years of age or older at the time of the transfer.

RESP contracts can take advantage of the new age limit as long as the specimen plan under which the contract is held is amended. The amendment must be applicable for 2008 and subsequent taxation years.

RESP contributions cannot be deducted from your income. In addition, you cannot deduct the interest you paid on money you borrowed to contribute to an RESP.

RESP contribution limits

For 2007 and later years, there is no annual limit for contributions to RESPs, however, the lifetime limit on the amounts that can be contributed to all RESP s for a beneficiary is $50,000.

Payments made to an RESP under the Canada Education Savings Act or under a designated provincial program are not included when determining if the lifetime limit has been exceeded.

Tax on RESP excess contributions

An excess contribution occurs at the end of a month when the total of all contributions made by all subscribers to all RESPs for a beneficiary is more than the lifetime limit for that beneficiary. We do not include payments made to an RESP under the Canada Education Savings Act or any designated provincial program when determining whether a beneficiary has an excess contribution.

Each subscriber for that beneficiary is liable to pay a 1% per-month tax on their share of the excess contribution that is not withdrawn by the end of the month. The tax is payable within 90 days after the end of the year in which there is an excess contribution. An excess contribution exists until it is withdrawn.

You have to inform us of your share of the excess contribution to all RESPs for a beneficiary. To calculate the amount of tax you have to pay on your share of the excess contribution for a year, fill out Form T1E-OVP, Individual Tax Return for RESP Excess Contributions.

You can get this form on our web site by going to Forms and publications.

Send your completed T1E-OVP return to the following address:

Canada Revenue Agency
Registered Plans Directorate
875 Heron Rd
Ottawa ON K1A 0L5

There are limits on the amounts that can be contributed to RESPs for a beneficiary.

For each beneficiary, the annual limit for contributions to all RESPs is the following:

for 1996 is $2,000

for 1997 to 2006 is $4,000

for 2007 and subsequent years, there is no limit

For each beneficiary, the lifetime limit for contributions to all RESPs is the following:

for 1996 to 2006 is $42,000

for 2007 and subsequent years is $50,000

Note

You can reduce the amount subject to tax by withdrawing the excess contributions. However, in determining whether the lifetime limit has been exceeded, we include the withdrawn amounts as contributions for the beneficiary even though they have been withdrawn.

Example (lifetime limit)

In 2012, Hugh established an RESP for his son Allan and contributed a total of $32,000 to it prior to 2023. Allan's grandmother, Cathy, also opened an RESP for Allan in 2012, and prior to 2023, contributed $16,000 to it. None of the prior year contributions made by Hugh and Cathy exceeded the annual or lifetime limits that were applicable in those prior years.

In January 2023, Hugh contributed $1,000 and Cathy contributed $500 to their respective RESPs and in July, both Hugh and Cathy contributed an additional $500. Hugh subsequently withdrew $500 in December.

The lifetime limit on all contributions that can be made to all RESPs for Allan is $50,000. Together Hugh and Cathy had contributed $48,000 to RESPs for Allan before 2023 and at the end of January 2023, the total contributions were $49,500 which was still within the lifetime limit for contributions to RESPs for Allan. However, at the end of July the total contributions were $50,500 and the lifetime limit was exceeded by $500.

RESP contribution

Hugh

Cathy

Before 2023

$32,000

$16,000

January 2023

$1,000

$500

July 2023

$500

$500

December 2023 (withdrawal)

($500)

0

Share of the lifetime contributions

$33,500

$17,000

Hugh's lifetime contributions for Allan before 2023

$32,000

Cathy's lifetime contributions for Allan before 2023

$16,000

Total contributions for Allan before 2023

$48,000

Maximum lifetime limit remaining (50,000 − 48,000)

$ 2,000

Total of contributions made in 2023 for Allan

$ 2,500

Excess contributions

$ 500

Hugh's share of the lifetime excess contributions for 2023 was $300. This was determined by multiplying his proportion of the total contributions made to both RESPs in 2023 ($1,500 ÷ $2,500) by the excess ($500) or ($1,500 ÷ $2,500 × $500). Similarly, Cathy's share was $200 ($1,000 ÷ $2,500 × $500).

Hugh's tax payable for 2023 is calculated as follows:
Hugh's tax on his share of the excess contribution is calculated for each month the excess contribution remains in the RESP. For July to November, Hugh's tax is $300 × 1% × 5 months or $15.00.

Cathy's tax payable for 2023 is calculated as follows:
Cathy's tax on her share of the excess contribution is calculated for each month the excess contribution remains in the RESP. For July to November, Cathy's tax is $200 × 1% × 5 months or $10.00. Because Hugh withdrew the excess amount in December 2023, neither Cathy nor Hugh must pay any tax on the excess contribution in December.

Waiver or cancellation of liability

We may waive or cancel all or part of the taxes if we determine it is fair to do so after reviewing all factors, including whether the tax arose because of a reasonable error and whether the tax also gave rise to more than one tax under the Income Tax Act. To consider your request, we need a letter that explains why the tax liability arose, why this is a reasonable error, and why it would be fair to cancel or waive all or part of the tax.
Note
A waiver refers to penalties and interest otherwise payable by a taxpayer for which relief is granted by the CRA before these amounts are assessed or charged to the taxpayer. A cancellation refers to penalties and interest amounts that were assessed or charged to the taxpayer for which relief is granted by the CRA.

Send your letter to the following address:

Canada Revenue Agency
Registered Plans Directorate
875 Heron Rd
Ottawa ON K1A 0L5

Payments from an RESP

The promoter can make the following types of payments:

Refund of contributions to the subscriber or the beneficiary

Subject to the terms and conditions of the RESP, the promoter can return your contributions to you tax-free when the contract ends or at any time before.

Promoters do not issue a T4A slip, Statement of Pension, Retirement, Annuity and Other Income, to report these payments. Do not include these payments as income on your income tax and benefit return.

The promoter can also pay the contributions tax-free to the beneficiary. This is in addition to any taxable educational assistance payments. Refer to the next section for more details.

Educational Assistance Payments

An educational assistance payment (EAP) is the amount paid to a beneficiary (a student) from an RESP to help finance the cost of post-secondary education. An EAP consists of the Canada education savings grant, the Canada learning bond, amounts paid under a designated provincial program and the earnings on the money saved in the RESP. The promoter reports EAPs in box 042 on a T4A slip and sends a copy to the student. The student includes the EAP s as income on their income tax and benefit return for the year the student receives them.

Note

A beneficiary must be a resident of Canada in order to receive the CESG or CLB as part of the EAP. Contact the appropriate provincial authorities to determine residency requirements for the eligibility conditions for provincial grants and incentives.

The promoter can only pay EAPs to or for a student if one of the following situations applies:

the student is enrolled in a qualifying educational program. This includes students attending a post-secondary educational institution and those enrolled in distance education courses, such as correspondence courses, provided by such institutions

the student has attained the age of 16 years and is enrolled in a specified educational program

A beneficiary is entitled to receive EAPs for up to six months after ceasing enrolment, provided that the payments would have qualified as EAP s if the payments had been made immediately before the student's enrolment ceased.

A qualifying educational program is an educational program at post-secondary school level, that lasts at least three consecutive weeks, and that requires a student to spend no less than 10 hours per week on courses or work in the program.

A specified educational program is a program at post-secondary school level that lasts at least three consecutive weeks, and that requires a student to spend not less than 12 hours per-month on courses in the program.

A post-secondary educational institution includes all the following:

a university, college, or other designated educational institution in Canada

an educational institution in Canada certified by ESDC offering non-credit courses that develop or improve skills in an occupation

a university outside Canada that has courses at the post-secondary school level at which a beneficiary was enrolled on a full-time basis in a course of not less than three consecutive weeks

a university, college, or other educational institution outside Canada that has courses at the post-secondary school level at which a beneficiary was enrolled in a course of not less than 13 consecutive weeks

Limit on EAPs

2023 legislation channges

Limit on EAP

Previous

2023 Legislation Changes

For studies in a qualifying educational program

$5,000

$8,000

For studies in a specified educational program

$2,500

$4,000

The maximum amount of EAP s that can be made to a student as soon as they qualify to receive them is one of the following:

for studies in a qualifying educational program - $8,000, for the first 13 consecutive weeks in such a program. After the student has completed the 13 consecutive weeks, there is no limit on the amount of EAPs that can be paid if the student continues to qualify to receive them. If there is a 12 month period in which the student is not enrolled in a qualifying educational program for 13 consecutive weeks, the $8,000 maximum applies again

for studies in a specified educational program - $4,000, for the 13 week period ending at the time of payment whether or not the student is enrolled in such a program throughout that 13 week period

Subject to the terms and conditions of the RESP, the promoter can supplement the $8,000 or $4,000 EAP by paying a portion of the contributions tax-free to the beneficiary.

ESDC may, on a case-by-case basis, approve an EAP amount of more than the above limit if the cost of tuition plus related expenses for a particular program is substantially higher than the average. For more information on how to request approval of an EAP of more than $8,000 or $4,000, promoters should call the Canada Education Savings Program at 1-888-276-3624.

Accumulated income payments

Accumulated income payments (AIPs) are amounts, usually paid to the subscriber, of the income earned from an RESP. An AIP does not include any of the following:

the payment of EAPs

payments to a designated educational institution in Canada

the refund of contributions to the subscriber or to the beneficiary

transfers to another RESP

repayments under the Canada Education Savings Act or under a designated provincial program

AIP s cannot be made as a single joint payment to separate subscribers.

An RESP may allow for AIP s when both of the following conditions are met:

the payment is made to, or for, a subscriber under the RESP who is resident in Canada

the payment is made to, or for, only one subscriber of the RESP

Note

When more than one individual is entitled to receive AIPs from the plan, the payments must be made separately to each person. No joint payments are allowed.

Also, any one of the following three conditions must apply:

the payment is made after the year that includes the 9th anniversary of the RESP and each individual (other than a deceased individual) who is or was a beneficiary has reached 21 years of age and is not currently eligible to receive an EAP (see Note)

the payment is made in the year that includes the 35th anniversary of the RESP, unless the RESP is a specified plan (see the definition) in which case the payment is made in the year that includes the 40th anniversary of the RESP

all the beneficiaries under the RESP are deceased when the payment is made

Note

We may waive the conditions in the first bullet if it is reasonable to expect that a beneficiary under the RESP will not be able to pursue post-secondary education because they suffer from a severe and prolonged mental impairment. Such requests have to be made by the RESP promoter in writing to the following address:

Canada Revenue Agency
Registered Plans Directorate
875 Heron Rd
Ottawa ON K1A 0L5

An RESP must be terminated by the end of February of the year after the year in which the first AIP is paid.

How AIPs are taxed

Promoters report AIPs in box 040 of a T4A slip, Statement of Pension, Retirement, Annuity and Other Income, and send a copy to the recipient of the AIP. The recipient has to include the AIP as income on their income tax and benefit return for the year they receive it. An AIP is subject to two different taxes: the regular income tax and an additional tax of 20% (12% for residents of Quebec).

Regular tax - This is the tax you calculate when you fill out your income tax and benefit return. It is based on your total taxable income.

Additional tax - You calculate this tax separately, using Form T1172, Additional Tax on Accumulated Income Payments from RESPs. Include a filled out copy of Form T1172 with your income tax and benefit return for the year you receive the AIP. You have to pay the additional tax by the balance due date for your regular tax, usually April 30 of the year that follows the year in which you received the AIP.

Reducing the amount of AIPs subject to tax - You can reduce the amount of AIPs subject to tax up to a lifetime maximum of $50,000, if you are the original subscriber, you acquired the former subscribers' rights as a consequence of marriage breakdown or, where there is no subscriber of the plan anymore, you are or were the spouse or common-law partner of a deceased subscriber and you meet both of the following conditions:

You contribute the amount to your registered retirement savings plan (RRSP), pooled registered pension plan (PRPP), or specified pension plan (SPP), or your spouse's or common-law partner's RRSP or SPP, in the year the AIPs are received or in the first 60 days of the following year.

Your RRSP deduction limit allows you to deduct the amount contributed to your RRSP, PRPP, or SPP or your spouse's or common-law partner's RRSP or SPP on line 20800 of your income tax and benefit return. Claim the deduction for the year in which any payments are made.

You cannot reduce the AIP s subject to tax if you became a subscriber under the plan after the death of the original subscriber.

By claiming a deduction for a contribution to your RRSP, PRPP, or SPP, you reduce your taxable income, which reduces your regular tax. The deduction for the contribution also reduces the amount of additional tax payable by reducing the amount of AIPs subject to tax (see Form T1172 ). If the amount of the deduction for the contribution equals the amount of the AIPs, the taxes on the AIP s are zero.

Promoters usually have to withhold regular and additional taxes on AIPs. However, they do not have to withhold tax if both of the following apply:

the AIPs are transferred directly to your RRSP, PRPP, or SPP or your spouse's or common-law partner's RRSP or SPP

your RRSP deduction limit allows you to deduct the contribution in the year it is made

Fill out Form T1171, Tax Withholding Waiver on Accumulated Income Payments from RESPs, and ask the promoter to transfer the payment directly to your RRSP, PRPP or SPP or your spouse's or common-law partner's RRSP or SPP without withholding tax.

For more information, go to Example - How AIPs are taxed.

Changing the beneficiary

Generally, where an individual becomes a beneficiary "a new beneficiary" in place of another beneficiary "a former beneficiary" we treat the contributions for the former beneficiary as if they had been made for the new beneficiary on the date they were originally made. If the new beneficiary already has an RESP, this may create an excess contribution.

An exception to the general rule applies in certain limited situations. The exception ensures that the contribution history of the former beneficiary is not added to the contribution history of the new beneficiary in the determination of whether the new beneficiary's lifetime contribution limit has been exceeded.

Either of the following situations are exceptions:

the new beneficiary is under 21 years of age and the parent of the new beneficiary was a parent of the former beneficiary

both beneficiaries are connected by a blood relationship or adoption to the original subscriber under the RESP and both beneficiaries are under 21 years of age

Transferring RESP property to another RESP

Most transfers from one RESP to another RESP will have no tax implications. This is the case when the transferring RESP and the receiving RESP have the same beneficiary. There are also no tax implications when a beneficiary under the transferring RESP has a brother or sister (under 21 years of age at the time the receiving plan was entered into, unless the receiving plan is a family plan) who is a beneficiary under the receiving RESP.

In any other case, transfers can result in an excess contribution. This is because the RESP contribution history for each beneficiary under the transferring RESP is assumed by each beneficiary under the receiving RESP. We treat each contribution as if it had been made into the receiving RESP. In addition, we treat each subscriber under the transferring RESP as a subscriber under the receiving RESP. This means that they are liable for any tax on excess contribution.

A transfer of assets between individual RESP s may result in the repayment of the Canada Education Savings Grants and Canada Learning Bonds when the transfer occurs between plans held by siblings and the plan receiving the transfer amount is held by a sibling whose age exceeds 20.

Rolling over RESP property on a tax-deferred basis to an RDSP

Rollovers can be made after 2013 from an RESP to an RDSP. In general terms, a subscriber of an RESP that allows accumulated income payments and a holder of an RDSP may jointly elect in prescribed form to rollover an accumulated income payment under the RESP to the RDSP if, at the time of the election, the RESP beneficiary is also the beneficiary under the RDSP.

To qualify for an education savings rollover, the beneficiary must meet the existing age and residency requirements in relation to RDSP contributions. As well, one of the following conditions must be met:

the beneficiary is, or will be, unable to pursue post-secondary education because they have a severe and prolonged mental impairment

the RESP has been in existence for at least 35 years

the RESP has been in existence for at least 10 years and each beneficiary under the RESP has attained 21 years of age and is not eligible to receive educational assistance payments

The education savings rollover to an RDSP will not be subject to regular income tax or the additional 20% tax. The RESP promoter must send Form RC435, Rollover from a Registered Education Savings Plan to a Registered Disability Savings Planto the RDSP issuer and keep a copy of it on file. This will satisfy the RESP promoter's requirement to file the election with the CRA.

When an education savings rollover occurs, contributions in the RESP will be returned to the RESP subscriber on a tax-free basis. As well, CESGs and CLBs in the RESP will be required to be repaid to ESDC and the RESP terminated by the end of February of the year after the year during which the rollover is made.

An education savings rollover to an RDSP:

will be considered a private contribution for the purpose of determining whether the RDSP is a primarily government-assisted plan (PGAP), but will not attract Canada disability savings grants (CDSGs)

will be included in the taxable portion of RDSP withdrawals made to the beneficiary

may not exceed, and will reduce the RDSP contribution lifetime limit of $200,000

An education savings rollover cannot be made if the beneficiary meets one of the following:

is not eligible for the disability tax credit (DTC)

has died

is over 59 years of age in the year of the contribution

is not a resident of Canada

An education savings rollover cannot be made if the RDSP holder has not provided their consent to the rollover.

Anti-Avoidance Rules for RESP

The anti-avoidance rules provide for a special tax on certain advantages that unduly exploit the tax attributes of an RESP, as well as special taxes on prohibited investments and on non-qualified investments.

Each person who is a subscriber of an RESP is jointly liable for the taxes on prohibited investments, non-qualified investments and advantages described below. Where two or more subscribers of an RESP are jointly liable to pay such a tax only one return needs to be filed on behalf of all the subscribers that are liable for the tax.

Tax payable on prohibited investments

If the RESP trust acquires a prohibited investment or if previously acquired property becomes prohibited, the investment will be subject to a special tax equal to 50% of the fair market value (FMV) of the investment, and the subscriber must file Form RC339, Individual Return for Certain Taxes for RRSPs, RRIFs, RESPs or RDSPs.

The tax is refundable in certain circumstances. For more information, see Refund of taxes paid on non-qualified or prohibited investments.

If the prohibited investment ceases to be a prohibited investment while it is held by the RESP trust, the RESP trust is considered to have disposed of and immediately re-acquired the property at its FMV.

The subscriber is also liable for the 100% advantage tax on income earned and capital gains realized on prohibited investments.

The 100% advantage tax applies to income earned, and the portion of any realized capital gain that accrued, after March 22, 2017, regardless of when the prohibited investment generating the income or gain was acquired.

Note

If an investment is both a non-qualified investment and a prohibited investment, it is treated as a prohibited investment only.

For more information, see Income Tax Folio S3-F10-C2, Prohibited Investments - RRSPs, RESPs, RRIFs, RDSPs and TFSAs.

Tax payable on non-qualified investments

If the RESP trust acquires property that is a non-qualified investment or if previously acquired property becomes non-qualified, the investment will be subject to a special tax equal to 50% of the FMV of the investment, and the subscriber must file Form RC339, Individual Return for Certain Taxes for RRSPs, RRIFs, RESPs or RDSPs, with a payment for any balance due, no later than June 30 following the end of the calendar year.

Notes

Any increase in the value of a non-qualified investment at the time of disposition is not reported on the individual's RC339, Individual Return for Certain Taxes for RRSPs, RRIFs, RESPs or RDSPs. Income earned and capital gains realized by an RESP trust on non-qualified investments will continue to be taxable to the trust, regardless of when the investment was acquired. The Trust must file a T3RET, T3 Trust Income Tax and Information Return and is liable to pay any tax owing.

Any charges or fees that the financial institution has passed on to the annuitant as a result of the T3 Return having been filed is a matter between the annuitant and the financial institution.

If an investment is both a non-qualified investment and a prohibited investment, it is treated as a prohibited investment only and the trust is not subject to tax on the investment earnings.

The tax payable on non-qualified investments is refundable in certain circumstances. For more information, see "Refund of taxes paid on non-qualified or prohibited investments" below.

The subscriber is also liable for the 100% advantage tax on non-qualified investment income if this income is not withdrawn promptly.

For more information, see Income Tax Folio S3-F10-C1, Qualified Investments - RRSPs, RESPs, RRIFs, RDSPs and TFSAs.

Refund of taxes paid on non-qualified or prohibited investments

You may be entitled to a refund of the 50% tax on non‑qualified or prohibited investments if the investment was disposed of, or ceases to be a non-qualified or prohibited investment, before the end of the calendar year after the year in which the tax arose (or such later time as is permitted by the Minister of National Revenue).

However, no refund will be issued if it is reasonable to expect that the subscriber knew, or should have known, that the investment was or would become a non-qualified or a prohibited investment.

The refund applies to the 50% tax on non-qualified or prohibited investments but not to the 100% tax on advantages.

Note

If the 50% tax on non-qualified or prohibited investments, and the entitlement to the refund of that tax, arose in the same calendar year then a remittance of the tax is not required. For example, no remittance of tax would be required if an RESP trust acquired and disposed of a non-qualified investment in the same calendar year.

How to claim a refund

To claim a refund, you must:

send your request in writing (you can attach it to your RC339 return)

attach the appropriate documents detailing the information relating to the acquisition and disposition of the non-qualified or prohibited property (you can attach the written request and supporting documents to your RC339 return)

The documents must contain the following:

name and description of the property

number of shares or units

date the property was acquired or became non-qualified or prohibited property

date of the disposition or the date that the property became qualified or ceased to be prohibited

Obligations of the RESP promoter

The promoter of an RESP must exercise the care, diligence and skill of a reasonably prudent person to minimize the possibility that a trust governed by the plan holds a non-qualified investment.

If the promoter fails to comply with this obligation, the promoter is liable to a penalty under the Income Tax Act.

The promoter will also be required to notify the subscriber of the RESP, in prescribed form and manner before March of a calendar year, if at any time in the preceding year the RESP trust acquired or disposed of a non-qualified investment, if a qualified investment became a non-qualified investment, or if a non-qualified investment became a qualified investment.

Tax treatment of RESPs

For non-qualified investments acquired after March 22, 2017 (or investments acquired before March 23, 2017, that cease to be qualified investments after March 22, 2017), the RESP trust will be subject to Part I tax on its income (including capital gains) from the investment.

In addition, an RESP's registration would no longer become revocable as a result of the RESP trust's acquisition after March 22, 2017, of a non-qualified investment.

Tax payable on an advantage

If the subscriber or a person not dealing at arm's length with the subscriber (including the RESP itself) was provided with an advantage in relation to their RESP during the year, a 100% tax is payable which is:

in the case of a benefit, the FMV of the benefit

in the case of a loan or a debt, the amount of the loan or debt

in the case of a registered plan strip, the amount of the registered plan strip

For taxes payable on an advantage, you must file using Form RC339, Individual Return for Certain Taxes for RRSPs, RRIFs, RESPs or RDSPs.

Waiver or cancellation of tax

We may waive or cancel all or part of the taxes if we determine it is fair to do so after reviewing all factors, including whether:

the tax arose because of a reasonable error

the extent to which the transaction or series of transactions that gave rise to the tax also gave rise to another tax under the Income Tax Act

the extent to which payments have been made from the RESP

The waiver is limited to tax paid under the anti-avoidance rules and not taxes paid under any other part of the Income Tax Act.

Note

A waiver refers to penalties and interest otherwise payable by a taxpayer for which relief is granted by the CRA before these amounts are assessed or charged to the taxpayer. A cancellation refers to penalties and interest amounts that were assessed or charged to the taxpayer for which relief is granted by the CRA.

To consider your request, we need a letter that explains why the tax liability arose, why this is a reasonable error, and why it would be fair to cancel or waive all or part of the tax. Send your letter to one of the following addresses:

If your residential address is based in Ontario, Prince Edward Island, Newfoundland and Labrador, Yukon, Nunavut, Northwest Territories as well as the following cities in the province of Quebec (Montréal, Québec City, Laval, Sherbrooke, Gatineau and Longueuil); send your request to:

Canada Revenue Agency
Sudbury Tax Centre
Pension Workflow Team
Post Office Box 20000, Station A
Sudbury ON P3A 5C1

If your residential address is based in Manitoba, Saskatchewan, Alberta, British Columbia, Nova Scotia, New Brunswick and the remaining areas in the province of Quebec not listed under the Sudbury Tax Centre; send your request to:

Canada Revenue Agency
Winnipeg Tax Centre
Pension Workflow Team
Post Office Box 14000, Station Main
Winnipeg MB R3C 3M2

Digital services for individuals

The CRA's digital services are fast easy, and secure!

My Account

My Account lets you view and manage your personal income tax and benefit information online.

Use My Account throughout the year to:

view your benefit and credit information and apply for certain benefits

view your notice of assessment or reassessment

view uncashed cheques and request a replacement payment

change your address, phone numbers, direct deposit information, marital status, and information about children in your care

manage notification preferences and receive email notifications when important changes are made to your account

check your tax-free savings account (TFSA) contribution room, your registered retirement savings plan (RRSP) deduction limit, and your first home savings account (FHSA) participation room

track the progress of certain files you have submitted to the CRA

make a payment online to the CRA with the My Payment service, create a pre-authorized debit (PAD) agreement, or create a QR code to pay in person at Canada Post for a fee.

For more information on how to make a payment, go to Payments to the CRA

view and print your proof of income statement

manage authorized representatives and authorization requests

submit documents to the CRA

submit an audit enquiry

link between your CRA My Account and Employment and Social Development Canada (ESDC) My Service Canada Account

manage multi-factor authentication settings

To sign in to or register for the CRA's digital services, go to:

Receiving your CRA mail online

Set your correspondence preference to "Electronic mail" to receive email notifications when CRA mail, like your notice of assessment, is available in your account.

For more information, go to email notifications from the CRA.

MyBenefits CRA mobile web application

Get your benefit information on the go!

Benefit recipients can access the MyBenefits CRA mobile web application throughout the year to quickly view their benefit and credit payment details, eligibility information and application status.

For more information, go to Mobile apps - Canada Revenue Agency.

Electronic payments

Make your payment using:

your Canadian financial institution's online or telephone banking services

the CRA's My Payment service at My Payment

your credit card, Interac e-transfer, or PayPal through one of the CRA's third-party service providers

pre-authorized debit (PAD) at My Account for Individuals

For more information, go to Make a payment to the Canada Revenue Agency.

Related forms and publications

Forms

RC193 - Service Feedback

RC298 - Advantage Tax Return for RRSP, TFSA, FHSA, or RDSP issuers, RESP promoters or RRIF carriers

RC339 - Individual Return for Certain Taxes for RRSPs, RRIFs, RESPs or RDSPs

RC435, Rollover from a Registered Education Savings Plan to a Registered Disability Savings Plan

RC459, Reprisal Complaint

T1E-OVP - Individual Tax Return for RESP Excess Contributions

T1171 - Tax Withholding Waiver on Accumulated Income Payments from RESPs

T1172 - Additional Tax on Accumulated Income Payments from RESPs

T4A - Statement of Pension, Retirement, Annuity, and Other Income

Income Tax Folios

S1-F5-C1, Related Persons and Dealing at Arm's Length

S3-F10-C1, Qualified Investments- RRSPs, RESPs, RRIFs, RDSPs and TFSAs

S3-F10-C2, Prohibited Investments - RRSPs, RESPs, RRIFs, RDSPs and TFSAs

S3-F10-C3, Advantages - RRSPs, RESPs, RRIFs, RDSPs, and TFSAs

If you need help

If you need more information after reading this guide, go to call Taxes-Canada Revenue Agency or 1-800-959-8281.

Direct deposit

Direct deposit is a fast, convenient, and secure way to receive your CRA payments directly in your account at a financial institution in Canada. For more information and ways to enrol, go to Direct deposit - Canada Revenue Agency or contact your financial institution.

Forms and publications

The CRA encourages electronic filing of your return. If you need a paper version of the CRA's forms and publications, go to Forms and publications or call one of the following numbers:

1-800-959-8281, from Canada and the United States

613-940-8495, from outside Canada and the United States.

The CRA only accepts collect calls made through telephone operators. After your call is accepted by an automated response, you may hear a beep and notice a normal connection delay

Electronic mailing lists

The CRA can send you an email when new information on a subject of interest to you is available on the website. To subscribe to the electronic mailing lists, go to Electronic mailing lists.

Tax Information Phone Service (TIPS)

For tax information by telephone, use the CRA's automated service, TIPS, by calling 1-800-267-6999.

Teletypewriter (TTY) users

If you use a use TTY for a hearing or speech impairment call 1-800-665-0354.

If you use an operator-assisted-relay service, call our regular telephone numbers instead of the TTY number.

Formal disputes (objections and appeals)

If you disagree with an assessment, determination, or decision, you have the right to file a formal dispute.

For more information about objections and formal disputes, and related deadlines, go to Objections, appeals, disputes and relief measures.

CRA Service Feedback Program

Service complaints

You can expect to be treated fairly under clear and established rules, and get a high level of service each time you deal with the CRA. For more information about the Taxpayer Bill of Rights, go to Taxpayer Bill of Rights.

You may provide compliments or suggestions, and if you are not satisfied with the service you received:

1. Try to resolve the matter with the employee you have been dealing with or call the telephone number provided in the correspondence you receive from the CRA. If you do not have contact information for the CRA, go to Contact information.

2. If you have not been able to resolve your service-related issue, you can ask to discuss the matter with the employee's supervisor.

3. If the problem is still not resolved, you can file a service-related complaint by filling out Form RC193, Service Feedback. For more information and to learn how to file a complaint, go to Submit service feedback.

If you are not satisfied with how the CRA has handled your service-related complaint, you can submit a complaint to the Office of the Taxpayers' Ombudsperson.

Reprisal complaints

If you have received a response regarding a previously submitted service complaint or a formal review of a CRA decision and feel you were not treated impartially by a CRA employee, you can submit a reprisal complaint by filling out Form RC459, Reprisal Complaint.

For more information, go to Reprisal Complaints.

Due dates for individual returns

When a due date falls on a Saturday, Sunday, or public holiday recognized by the CRA, your return is considered on time if the CRA receives it or if it is postmarked on or before the next business day.

For more information, go to Due dates and payment dates.

Cancel or waive penalties and interest

The CRA administers legislation, commonly called taxpayer relief provisions, that allows the CRA's discretion to cancel or waive penalties and interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control.

The CRA's discretion to grant relief is limited to any period that ends within 10 calendar years before the year in which a relief request is made.

For penalties, the CRA will consider your request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to a penalty for a tax year or fiscal period ending in 2013 or later.

For interest on a balance owing for any tax year or fiscal period, the CRA will consider only the amounts that accrued during the 10 calendar years before the year in which you make your request. For example, your request made in 2023 must relate to interest that accrued in 2013 or later.

Taxpayer relief requests can be made online using the CRA's My Account, My Business Account (MyBA), or Represent a Client digital services:

My Account: After signing in, select "Accounts and payments," then "Request relief of penalties and interest."

MyBA or Represent a Client: After signing in, on the MyBA overview page, select the appropriate program from the navigation menu, then select the correct account. Finally, select "Request relief of penalties and the interest" under "Request" heading.

You can also fill out Form RC4288, Request for Taxpayer Relief - Cancel or Waive Penalties and Interest, and send it with one of the following ways:

online with My Account: select "Submit documents" under the "Correspondence" section

online with My Business Account (MyBA) or Represent a Client select "Submit documents" from the banner at the top of the page

by mail to the designated office, as shown on the last page of the form, based on your place of residence.

For information on the "Submit Documents online" service, go to Submit documents online.

For more details on the required supporting documents, relief from penalties and interest, and other related forms and publications, go to Cancel or waive penalties and interest.

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Registered Education Savings Plans (RESPs)

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This page provides information for individuals on registered education savings plans (RESPs).

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Image #1 - Factors to evaluate the savings plan

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Image #1 - Factors to evaluate the savings plan

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The image provides a clear understanding of the factors to consider while choosing a best savings as you can see above.

I chose this image as these are the perfect factors one must consider in their savings plan and is easy to remember as it is portrayed in a circle format

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Image #2 - The various savings plan in Canada

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Image #2 - The various savings plan in Canada

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One must know all the available savings plan in Canada in order to find the best on that would suit their needs and offer a high return on their deposits.

I have chosen this image because it consists of all the four savings plan that is TFSA , RRSP , RESP and RDSP

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Question 1

The surprising topic I found was the different interest rates the bank offers on our savings plan and the savings fee some banks charge on our interest rates. It was a very interesting topic as I learnt a lot of new things which I would apply when I start my first savings account as I have not started it until now.

Question 2

I was in a plan to start my savings account in the next month and now I have a complete understanding of where I should deposit my money, what factors I must consider while depositing. After researching through different websites I feel that I would start investing in TFSA as it would offer a desirable interest rate I want and is a risk free investment account. I have also gained the knowledge of the interest rates the different bank provide and now I can confidently deposit my money in a savings account.

Question 3

I would tell them about the different types of savings account in Canada which includes TFSA (Tax Free Savings Account, RESP (Registered Education Savings Plan) , RRSP (Registered Retirement Savings Plan) and RDSP (Registered Disability Savings Plan). I would also explain them the factors to consider while choosing the savings plan.