Changes to RESP rules now in effect
Following the recently passed 2023 federal budget proposals, certain changes have been made to the Registered Education Savings Plan (“RESP”), specifically in response to the rising costs of post-secondary education and the removal of the restriction which prohibited divorced or separated parents from jointly opening an RESP contract for their child(ren).
These changes have resulted in the following changes to the RESP:
- The Education Assistance Payment (“EAP”) withdrawal limit has been increased from $5,000 to $8,000 for full-time students during their first 13 weeks of enrolment and from $2,500 to $4,000 for part-time students. Subscribers can now request EAP withdrawals up to the new limits for full-time and part-time studies. The EAP represents the growth and government grants paid into the plan, and it is a good planning strategy to withdraw as much of this as possible early on while the student's income is low and in case they don't use all of the RESP money as the grants are repayable if not used by a beneficiary.
- Divorced or separated parents can now open a joint RESP account.
The RESP still represents the best savings vehicle for post-secondary education in Canada but it is best to work with an advisor to adopt the correct investment strategy, which will change quite a bit over the life cycle of the account, particularly just before and during the period of education, as well as optimizing withdrawals to ensure that you are taking out as much EAP as possible in the early years of the plan.