Reader Alex left the following comment on how to get started with a RESP for his soon-to-arrive baby:

Do you have any RESP accounts that you recommend? Most I’ve seen charge an administration fee, and I’d like to avoid that.

I have set up a RESP for my boys with TD eFunds, which doesn’t charge an administration fee and offers some of the lowest-cost index mutual funds in Canada. There is a bit of a process involved in setting up the account initially but once it is taken care of, you can contribute every year with the click of a button. Three-to-four weeks after the contribution is made the Canada Education Savings Grant (CESG) is automatically deposited into the account.

I park the initial contribution and the CESG in a money market fund, which I then liquidate and buy four funds according to my asset allocation target (TD Canadian Bond Index eFund: 20%, TD Canadian Index eFund: 20%, TD US Index eFund: 35%, TD International Index eFund: 25%). The portfolio is rebalanced roughly once a year when new contributions are made. This simple portfolio has performed reasonably well gaining about 4.3% over the past nine months.

There are other options available for RESPs that are not very attractive in my opinion. Group RESP plans like the Canadian Scholarship Trust are inflexible, expensive (the heavy promotions to new parents comes out of the pockets of existing plan members) and are invested in low-growth fixed income assets. I also avoided a self-directed RESP because they typically charge an annual administration fee if a minimum balance is not maintained.

Related Post – RESP: Getting Started

This article has 205 comments

  1. The RESP world is almost as complicated as the RRSP world. I have a self directed account with TD Waterhouse. I do pay a $50 a year administration fee + GST, but I like the fact that I can trade stocks and that I am not limited to mutual funds.

    Run away from the Canadian Scholarship Trust type plans. The only way they make money is because people fail to follow all of their rules, and then loose the money already invested.

    I have been having a hard time finding out about the family option with RESP plans. I have heard that you can have more then one child listed for benefits, but I have not been able to find out what the rules are. Before I lock myself into any plans I like to know what the cost would be if I need to cancel it. Any good links out there about this?

    Cheers and thanks for starting this topic CC.


  2. Wow CC, I have an appointment Wednesday to go in to my local TD Branch to get everything set up for almost the exact same plan you have with your RESP. I was going with the European index rather than International, and a slightly higher North America bias.

    I have 2 children now, one aged 5 just stated Kindergarten, and one 2. The Aged 5 one I opened a CST plan; unfortunately before I starting reading about other RESP strategies (, everyone join pay their fees and quit to put my daughter through school). It’s growing steadily, however they have ENOURMOUS GIGANTIC fees at the start which really slow the growth. These fees are refunded at the end, however you will not gain interest on this money and it’s taken from the first payments. You bash the interest income from these, but according to their 2005 annual report their 10 year returns have been between 6.9-8% depending on your plan. I don’t consider that too bad for an easy to set up, simple monthly ‘set it and forget it’ plan.

    My plan for my 2 year old son is simply ride out low MER indexes for 8 years and from age 10 to 16,17 or 18 slowly move more and more funds to safer locations.

    I think this simple approach will far surpass the return I will get from my daughters CST plan, however only time will tell. Though both my children will have more than I started with when I went to college, and that’s the only thing that really matters.

  3. Canadian Capitalist

    Dan: We have made only two contributions to the boys’ plans so far, so I think paying $50 or 1% for an administration fee is a bit steep. I would wait for at least for a few more years before considering the self-directed option. That said, if you already have a bit of money saved up in a RESP, self-directed is a good route to take.

    I think you can list any related family member as a beneficiary. You can find all the rules on the Government website. Check the resources link in my old post.

  4. Canadian Capitalist

    Traci: The reason CST has decent returns is attrition. If a member does not keep contributing, because they lose money already invested.

    In my opinion, you can do just as well with a self-directed or mutual fund RESP with all the flexibility.

  5. I think your wording is a little deceiving on the CST. Your contributions will be returned upon termination of the plan less their fees. Since people have to pay $200 per ‘unit’ of the plan this can be quite a sizable chunk. Also, I believe the interest is held separately from your contribution amount and that may not be returned to you on leaving. It seems they reserve that for regular withdrawals when a child enrolls in a post-secondary education institution.

    In their own words:
    “To close your plan, please send a written request to terminate your agreement … your contributions less enrolment fees, depository & service charges and any insurance premiums paid will be returned to you.”

    I am in no way advising anyone to even consider using them. I feel it is by far better to set up your own plan through something like the TD eFunds than use an RESP service. This is the reason I am switching for my son instead of using CST like I did with my daughter.

  6. Great site CC – I visit every day.

    I have 3 kids, have a self-directed TDW account which is now well over 20k so I think there are no fees (right??).

    One of the obvious advantages of an RESP is the governments contributions. I also try to keep any foreign ETF’s in Canadian dollars to eliminate currency risk.

    A great “strategy” we have is to get the grandparents to contribute to the RESP in lieu of expensive toys which my kids play with once and have too many of anyways! May not work for all/many but works for us well.

  7. Canadian Capitalist

    Traci: My apologies for the incorrect understanding. Still, like you point out a mutual fund RESP account is a better option.

    Dan: TD Waterhouse has a $50 admin fee if the account is less than $25K.

  8. Always set up a family plan RESP even if you have only one child – that way you’ll have less paperwork when you add another child along the way.

    Family plans are the best way to go because if only one child goes to school, he/she can use siblings growth and grant money w/o penalty.

    The real trick to RESPs is withdrawing the money in the smartest fashion. You have a lot of control whether you take out taxable ‘EAP payments’ or non-taxable “refund of contributions’, so tax efficieny is paramount. If the student has little or no taxable income, consider creating taxable income by withdrawing EAP payments (even if the student doesn’t need the money). Also, withdraw any amount the government can take back first so you don’t risk losing the funds if you fail to meet the criteria later.

    Last thing – Scholarship plans are horrible – the OSC warned on these years ago – they are really inflexible. Just say no.

  9. I’m just wandering if anyone of you had chance to get “Additional CESG” for your kids RESP? Apparently they will add “10% or 20% on the first $500.00 contributed to an RESP”?

  10. I believe that’s the Canada Learning Bond if you are searching for it. It’s strictly for lower income families and is available as a one time $500.00 deposit to your RESP in the first year and, from what I understand, $100 for the next 15 years as long as the income eligibility is still met. Apparently this is set at about $36000 of family income.

    Info at:

  11. I was doing a search for Canadian Money Blogs. There don’t seem to be all that many of them.

    This is a nice looking blog. (One of the very few Canadian blogs!)

    I put linked to you from my site, CMA. Cheers!

  12. Traciatim: thanks for pointing this our! You’re right, this is just another name for Canada Learning Bond created by RESP providers (,1608,CID9385_LIDen,00.html).

  13. Devirt: Rather than the Canada Learning Bond, I thought you were refering to the different levels of CESG based on income as referred to on the Canlearn website, see link:

    According to this website, besides the 20 cents per dollar to the first $2000 of contributions, the CESG is 40 cents per dollar contributed on first $500 for net family income of less than $36,378; and 30 cents per dollar contributed on first $500 for net family income of $36,378 to $72,756. I fall within the latter net family income bracket, but have only seen 20 cents per dollar so far in this first year of contributions. Hopefully, they correct this next year after reviewing my tax return.

  14. What are your thoughts about avoiding (or limiting) the RESP and investing mostly in dividend paying stocks? Although there are no tax advantages for me, my child would have more freedom with the dividends.

    My concern is that our child may not want to pursue further education and why should we impose that decision on him/her. What if the child wants to travel for sometime or start a business? Currently, these are avenues covered by RESPs or the CST. However, a diverse portfolio of dividend paying stocks would supplement our childs income during life enriching travel, starting a business or pursuing their educational dreams.

    I’d be interested to hear your thoughts.


    PS. my mother invested in the CST plan for me and my two siblings. Only one of us took *full* advantage of it. Personally, I’d not recomend it.

  15. Correction:
    Currently, these are avenues NOT covered by RESPs or the CST.

  16. Ahmed, if your child does not choose to go to university you can roll the money into your RRSP’s, assuming you have room to. You only lose the gov’t contribution amount. Then you could take the healthy income tax return and give it to your child to go travelling. 🙂

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  18. Ryan: I didn’t think that rolling over the RESP to an RRSP would be counted as a RRSP contribution since they are both tax-deferral tools. Sorry to be a doubter, but it sounds a little too good to be true.

  19. Hmmm, well I could be reading this wrong but…

    1. What happens if the beneficiary decides not to pursue a post-secondary education or I need to withdraw the money?

    You have a number of options, including –

    transfer the RESP assets to another eligible beneficiary
    withdraw the funds for yourself (you must repay the government grants and pay taxes and a surcharge on investment income you withdraw)
    transfer up to $50,000 of the investment income to the subscriber’s regular or spousal Retirement Savings Plan (RSP)if there is enough contribution room
    donate the investment income to a Canadian educational institution

  20. Canadian Capitalist

    Anjo: I think Ryan is right. Note that you don’t get a tax deduction for a RESP like you do for a RRSP. In other words, you put after-tax dollars into a RESP but pre-tax dollars into a RRSP.

  21. anjo: I hope Ryan is right. Your logic is sound, CC. While I hope my kids pursue post-secondary education someday, this would provide some consolation should they not.

  22. Some comments on this blog, in no particular order:

    – Scotiabank seems to be the best option for self-directed RSP – their fee is $25/year when you have less than $15,000, no charge after $15,000 – everyone else is $25,000/$50. It will be years before I have even $15,000 in.

    – What does your RSP investment strategy look like? I have self-directed so I can purchase stocks, rather than mutual funds (MF). MF’s charge an MER (Management Expense Ratio) of about 3% *which you do not see* to manage your money. Take 3% of your holdings, per year, and this is what you are losing. The reality is that MF managers need to make money, thus the fee (fair enough). If you like a fund, and believe in it, look at the stocks the MF managers buy, and buy the same ones. Net result will be the same, but you will have another 3% in your pocket!

    – If your children do *not* go to school, you will get back the money you put in, at a minimum, and the interest you make on those funds. The amount you contribute will be returned tax-free because you have already paid tax. You will pay tax on the capital gains. The government will get their money back…it wasn’t your’s to begin with! Its for education, and if they don’t use it for that, well, you shouldn’t get the money.

  23. I am with a group resp company for my children. I like the fact that it offers guaranteed principal and a good rate of return. The fees are taken from early contributions, but at least I have a chance on getting these fees back. and with a self directed plan, fees are paid over the 18 years that you are making your contributions, adding up to alot more than what the membership fee would be in a group plan. for those of you that are considering RESPs, stay away from the mutual fund market as your investment is not guaranteed and you could lose money along with the government grant and this was the reason for starting the RESP.

    I think what some people are forgetting is that this program is not intended to make parents wealthy. its about covering the cost of your childrens education.

  24. Canadian Capitalist

    Aaron: Thank you for your comments. It seems to me that you have researched the RESP options and concluded that a group RESP is suitable for you.

    I reached the opposite conclusion. As I’ve noted in this post, I am enrolled through TD eFunds. I do not pay a penny in fees. My kids are still in nappies, so I am willing to take the risk of being in the market for a better return. The RESP portfolio is diversified using index funds and as they enter their teen years, I would slowly convert to a fixed income portfolio. The biggest attraction though for me is that a self-directed RESP is totally under my control.

  25. Aaron writes: “for those of you that are considering RESPs, stay away from the mutual fund market as your investment is not guaranteed and you could lose money along with the government grant and this was the reason for starting the RESP.”

    If you’re extremely averse to market risk, then this might be a route to choose. The problem with more conservative plans (such as CST) is that they face another risk: inflation. Post-secondary education in the past 20 years has become more expensive at a rate far exceeding inflation (upwards of 8-10% each year for some years). If your RESP money is in an investment that pays you only 3-5% per year, you had better be making a lot of contributions!

    Sure, money in mutual funds isn’t “guaranteed”, but there are risks to every investment. Many people only look at market risk (the risk that your principal would decrease in value) and ignore inflationary risks. This isn’t a very good way to invest – you need to look at all the risks, and all the potential rewards, and come to a conclusion from there.

  26. George is right about education costs rising and for this reasong when CST gives you all of their fees back plus the return on the money of about 6%
    plus top ups (extra money in the plan) the return on the money is between 7% to 8%. Canadian Scholarship Trust the foundation is non-profit so all of the surplus is paid back to children when they attend a post-secondary institution. This surplus is calculated each year as children apply for post secondary education and is paid on top of the interest rates earned from investments. As for Ray’s advice to never to stop making payments. This is true. The money is intended to grow over the years in order to have some valuable savings. CST agents will tell you so themselves that once you start a plan you need to keep contributing. But isn’t this the truth everywhere you go that there are fees to pay and anytime you want to pull out and the contributor looses the money. I have a CST plan for my daughter and I am happy with it. This plan will mature in her 17th year and the money will wait for her to start post secondary education. So, this plan has a maturity date. Mutual funds have no maturity dates so if the plan performs poorly in the year when the child needs the money the child will not be able to go to school until the plan makes some money. To work with mutual funds or stocks parents need to know what they are doing. This takes a lot of time and planning. I am too busy for that. My suggestion is to people who complain about group plans like CST’s don’t put in the plan more than what you can comfortably pay for. That way you will not have to pull out of the plan.

  27. My reply to Ahmed:
    If a child does not go to a post secondary education it will have a very hard life. In the future to find work people will need minimum two years of college or university. Also, to have a business one needs to know how to manage and market a business and that also takes education. Many businesses in Canada fail because people don’t know how to find a good location suitable for their business and how to manage a business in our society.

  28. To Ahmed:

    How much do you know about RESP payouts?
    A lot of payouts depend on government rules.
    Go on the HRSDC website under frequently asked questions and you will see that payouts are regulated by the government and all institutions are under the same law.

  29. The banks will rob you over the years with their MER’s. The CST plan is quite incredible when you compare it with the alternatives. And the plan has become much more flexible over the years for changing beneficiaries and reducing payments. Do some more research, I happen to know that some of the top financial people at Scotiabank invest with CST.

  30. I am just beginning to understand the mistake I made with the Canadian Scholarship Trust Plan. I also trusted that the salesman was telling me the whole story and I didn’t read the package he left with the prospectus in it. I had no idea about the penalties for stopping contributions.
    I just pulled out the prospectus and the fact that it says right on the top of the front cover “No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise” is making me think I’m in trouble.
    Any advice out there? Is there any chance that I can guilt or scream these people into returning my enrollment fees?

  31. Canadian Capitalist

    Helen: The short answer is you can’t unless you had enrolled within the last 60 days (I may be wrong, so check the prospectus). If you have already contributed for a few years, your best bet is to keep contributing.

  32. I looked at the prospectus (Three years too late) and I think you are right. I considered continuing the contributions in order to not lose the fees, but that leaves a really bad taste in my mouth. It feels like paying protection money or something. Then what other fine print surprise will I find in the end? If they can stucture it like this, what else is in store?
    I’m just having a hard time wrapping my head around this. It seems ludicrous. In this day and age when we are regulated to death and there are bazillions of laws on the books for our protection, this is allowed? It just doesn’t seem right.
    Still scratching my head.

  33. To Helen:

    You will notice that with CST when children start post secondary education YOU the contributor can withdraw all of the principal minus the fees right away and children get the fees back over the 4 years together with the government grant money and the interest from CST and any surplus from investments. Banks will also charge you a high fee if you try to pull out. The government takes their money back also. So, like any investment it is intended for children’s education and should be kept for that. CST returns more money back to the contributor in the first year when children start a post secondary program than other institutions of the same kind. Compare the prospectus rules to the rules on the Human Resources Development Canada web site and you will see that they follow the same rules. You are not in trouble as long as you keep the plan and your children go to school. CST also allows you to transfer any unused contributions to younger children or you can transfer to your RRSP. Like RRSP you would pay a penalty any time you try to pull out the money because investments of this sort are not bank accounts the money needs to be there for RESP purposes. The government has allowed these plans for these purposes and does not tolerate withdrawals. If people want an investment where they want to withdraw cash or make money they need to buy different kinds of investments like stocks, bond, treasury bills, mutual funds etc. make the money and pay taxes on income from the investments.

  34. I agree with Frank that banks will rob you of your money with their MER’s. Also you need to consider the fact that banks put your RESP money into mutual funds. If you have another day like September 11th in the future when your children go to school what will happen to mutual funds and your children’s money? I prefer to invest with companies that put most of the RESP money into Canada and Provincial Savings Bonds because my child’s money needs to be in low risk secure investments. I am not looking to get rich off this just to save some money for my child’s education, get the government grant money and some interest.

  35. Canadian Capitalist

    Brenda: I’ve elaborated elsewhere that I invest the RESP funds in a very low-cost manner using TD eFunds. I’ve also noted that you shouldn’t take unnecessary risks and move money into low-risk investments like GICs and bonds as kids are approaching university age. I am not looking to get rich off RESPs either, just pointing out that there are other superior (in my opinion) alternatives with less strings attached.

    The problem I have with group RESPs is that they are sold aggressively by agents without explaining the risks to clients (Can the client afford to contribute monthly for more than 15 years? What does the agent care if they can’t? Once they have the signature they have earned the commissions).

    My kids are still in their nappies and it makes no sense to me that their college funds should be invested entirely in bonds. They can afford to take a bit more risk and invest in equities to have a shot at a better return.

    A self-directed RESP gives me total control. I can take appropriate risks with the portfolio. I can contribute one year and skip entirely the next. I still get the matching grant. IMO, its the best option.

  36. One more point about CST. CST is a non-profit organization which means that any surplus is paid to children when they attend a post secondary institution whereas in banks and other institutions like insruance companies the profits go to shareholders of that organization. The money that CST hold back if people cancel the plan is also put back in the pool and given to children who do go to school. Educate you children that they need some kind of post secondary education in order to have a decent job. In the future people will need minimum two years of college or university to be able to get
    an office job or similar. And those who do finish the 4 year programs or higher will get much better salaries than those who do not go to school. Over the next 5 years the most promising jobs will require a university or college education. By the way CST pays for university, college, distance education, trade schools, religious schools, vocational schools, technical schools etc. as long as they are registered with Human Resources and Development Canada and recognized by the tax act. Some other institutions will pay only for college and university. So before you invest in any plan find out what they will cover.

  37. To Canadian Capitalist: How many people do you kn ow who have the financial knowledge to deal with transfers of funds to maximize returns? Most people just buy it and pay into it for a number of years. Also CST agent do tell the clients about the fact that they need to keep the plan and the risks of cancelling. There is an alternative plan with CST – Family or Individual Plan that I bought for my child which is started with one time fee of $50.00 non-refundable and to start I deposited $150.00 after that I just call CST and tell them how much to withdraw from my account. I am not obliged to make regular monthly contributions. I do need to contribute at least $100/year dollars to get the government grant mioney. So I was given a choice between the two plans. And I don’t think that people are pushed into these plans but they choose them because the interest rate is better and there are extra monies in group plans from surplus which Family and Individual plan holder do not get. I am too busy to worry about mutual funds and their fluctuation and this is why I chose CST. I acutally called them to come and sell to me after I talked to the banks and checked out other group RESP companies. I found CST better structured and more flexible than other companies after I looked at the descriptions of their plans.

  38. Canadian Capitalist

    Brenda: You are right that CST is a non-profit trust but that it because it has to be to qualify as a group RESP program. I don’t know if you’ve read the prospectus. I did and it is extremely difficult to figure out what the impact of fees will be (and there is a laundry list of fees). Also, the topping-up of the education payments is discretionary (more than 1/3 of the payments of the past few years) and CST is under no obligation to keep making these payments.

    We live in a world where basic financial knowledge is absolutely essential. If you can understand how CST works (you shouldn’t even consider investing before you do), you can easily learn how to construct a portfolio with an appropriate risk level.

    While we can debate if the group RESP plan is better than a self-directed RESP, it is very clear that you do not want to invest in the family or individual plans because they invest in low-risk assets without the benefits of attrition and topping-up. You will be better off transferring to a self-directed RESP and investing in a money market fund on your own.

  39. Canadian Capitalist

    Brenda: I think you are mistaken that the earnings in a group RESP is similar to the “interest rate”. A group RESP’s returns depends on:

    1. Investment earnings on bonds which carry an interest rate. Today, it will be 4%-5%.
    2. Earnings from attrition. i.e. earnings on other people’s money who have dropped out.
    3. A top-up from the general fund into which your enrollment fees are deposited. This is totally discretionary.

    I can’t recall the exact percentages (you’ll have to read the prospectus) but roughly #3 supplies 1/3 of the earnings, #2 roughly 12% and #1 the rest.

    Don’t forget that going forward earnings from #1 are likely to be low (unlike in the past).

  40. To: Canadian Capitalist, yes, I have read the prospectus and the fees in the group plan are $200 per unit and in the individual plan $50.00 one time fee. I am not willing to risk my child’s money in anything else because of fluctuation and you cannot tell me that TD-bank’s funds are low risk. Mutual funds are never low risk. 17 years is not enough time to recover from if the funds drop also what if they drop just before the child goes to school. I believe that then I could loose not just my prinicipal but the government’s 20% as well. I am not a gambler with my child’s money. I will not cancel the plan that I bought so I do not have to worry about cancellation fees and so forth. I personally know people who have kept the CST plans and are vey happy to see the money when children go to school. People who cannot afford to keep a plan should not start one in the fist place becaus they will loose a good portion of their money no matter with whom they invest.

  41. Canadian Capitalist

    Brenda: I am not trying to convince you to leave the group RESP. In fact, I’ve written a post that if you’ve signed for a group plan, you should keep contributing.

    I am also definitely not advocating that you gamble with your money, whether it is for your child’s education or for your retirement. If you go through my posts, you’ll hopefully agree that I haven’t ever advocated taking excessive risks.

    I don’t know how you can say that over 10 years a fully diversified low-cost portfolio won’t deliver superior returns compared to fixed income investments. I am simply saying that a self-directed RESP, implemented properly, will provide superior returns to group RESPs, with greater flexibility to the contributor.

  42. To Canadian Capitalist: Earnings from bonds plus other top ups have given on average 7% interest rate over the 10 years according to CST that is in their prospectus as well. And how much I get in interest rate is not important for me. All I want is the government grant’s money plus some interest which by the way is much better than what TD canada trust offered my on my child’s savings account. I opened an account with Bank of Nova Scotia for my child because they were giving higher interest rates than anyone else and it still isn’t worth keeping the money there so I opened a RESP and I am quite happy with it.

  43. Canadian Capitalist

    Brenda: The 7% earnings in the CST prospectus refers to the earnings on its investment portfolio (different from what you earn on your contributions), without taking fees into account. It is exactly the same return you could have earned if you had purchased a no-risk Canada bond in that same period. It is definitely not going to be the return you earn on your contribution.

    Comparing a savings account with a group RESP is like comparing apples to oranges. The fair comparison is between a group RESP and a self-directed RESP.

  44. To Canadian Capitalist: I agree with you that a self directed plan can deliver better returns but people have to have the knowledge of mutual funds and if they don’t they should not open such a plan. Like anywhere people who are not involved in financial world will be persuaded by agents to put their monies God knows where. So this type of plan is good if you are a banker, stock broker insurance agent etc. I am not so I play it safe.

  45. Canadian Capitalist

    Brenda: In my opinion, if you can understand how the CST plan works (if you don’t, you shouldn’t invest), you can create a passive portfolio that takes 15 minutes to implement and 5 minutes to maintain and switch to GICs/bonds as kids reach university age. While I agree that once you enroll in a group RESP, it is best to keep contributing, I disagree that it is the best option for someone planning to start a RESP.

  46. I am happy with what I have. The plan has a maturity date and they money will mature in her 17 year on the child’s bihday and it will be waiting for her to go to school.
    Everyone is focusing too much on the negative and what if children go to school. What about if they do go to school and what if they go to school after 4 years of university. My child wants to be a veterinarian. So with CST she has a chance to get scholarships after she completes 4 years of education up until she is 27years old. This is a 5-year university degree minimum. Can you get this from a bank?

  47. Canadian Capitalist

    Brenda: I do hope the CST works out for you. I just decided to choose a different option. I don’t think a chance to win 1 of 10 graduate scholarships worth $7,500 should be a reason to go with CST.

  48. hello folks,

    We have been contributing to an RESP for 4 kids through MD management for the past number of years without paying any attention to it. I now have more time and as our portfolio is increasing, have decided to become more aware.

    Our kids are grade 8 and 10, and year 1 and 2 at Queens.(ages 14,16,18,20) Clearly out of nappies.

    My “advisor” at MDM is OK with our 127K divided almost equally between fixed income(MD bond and mortgage fund, mer 1.4) and Canadian equity ( MD dividend fund, also 1.4 MER)

    What do you think?

    Maybe its too late to get too worked up about costs, but I also have some issues with the allocation at this stage of the plan.(the withdrawal phase)

    I am thinking about moving the plan to a self-directed plan at TD (where we are already “private clients” for banking purposes) and look at a combination of “cash”(MMF or high-interest savings), a GIC “ladder” and the rest in e-series funds (say, 1/3-1/3-1/3 CDN,US,INT)


  49. Canadian Capitalist

    DJ: In my opinion, your asset allocation is far too risky because even your youngest is only 8 years from finishing his/her degree. A 50% allocation to equities sounds far too aggressive at this late stage in the game. In the event of a steep fall in Canadian equities, you may not have enough time to recover. If you invested in the S&P500 in 2000, today, 7 years later, you are still waiting for a recovery.

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  51. Great discussion – I’ll just add a few words… 🙂

    Brenda I think you have some of the facts wrong – the non group plan withdrawal rules are not the same as the group plans. In the group plans you get your contributions back minus initial fees and the plan keeps the earnings. In the self-directed plans, you get 100% of the contributions back and you get the earnings as well. There are extra taxes on these earnings but at least you get some of those earnings back.

    As far as the banks “will rob you of your money with their MERs”. You would be hard pressed to find a normal fund at a bank that has a MER as high as CST. In the CST prospectus it lists the charges for administration and depository charges which total $20,288,831 for 2005 which represents an mer charge of about 5.4% considering the investment portfolio is approx $375 million. This is roughly twice what a normal equity MF fund would charge and about 3-4 times what a fixed income mutual fund would charge. RESP providers of any type have to spend quite a bit on admin but the problem with CST is that the assets under management are not large enough to get any kind of economy of scale. Most of the big mutual fund companies have 20+ billion in assets so they can spread out the costs a lot better.

    Another thing you mentioned is how if something happens, the mutual funds will lose value – this can be dealt with asset allocation. Any financial advisor can help with this or better yet, do a bit of reading and learn the basics…that’s all you need.

    “CST is a non-profit organization” – this is true and you know what else is true? Mutual funds are also non-profit organizations. However…both these funds need investment advisors, administrative and operations completed and both entities hire other companies (which are for-profit) to run these duties. Bottom line is that there is no difference in the profit/non-profit status of CST or any mutual fund.

    As CC has mentioned Brenda – don’t even think about leaving CST, it’s not a scam or a big ripoff, and once you are in then you are better off staying in. The lesson here is that most people who haven’t started an resp would be better off with a financial advisor at an investment company or better yet, diy.

    DJ – I think the portion of the portfolio that will be going to the 2 eldest should be in fixed income only. The younger two – maybe 60/40 bonds/equity? or even 70/30. The mers aren’t too bad at MD management so although you should save some money by going low cost, I’m not sure if it will be worth the hassle – but that’s up to you. My suggestion is to do it during the summer when you don’t need to do withdrawals since it might take a while to do the transfers. Also – the MER on the MD Bond & Mortgage is 0.94% – not 1.4%

  52. All you guys that are cutting up scholarship plans think you know what you are talking about you don’t, you don’t know how flexible they really are.

  53. Canadian Capitalist

    Mario: Just claiming that scholarship plans are more flexible than self-directed is not enough. Please do tell us how.

  54. Can anyone help me find a comparison chart that shows the difference between saving for your child’s education with just a regular savings plan vs with an RESP? I’m trying to find a chart like this for a powerpoint presentation at work, and can only find charts with outdated info (before the new budget came down). We were using the chart that’s posted on TD Canada Trust’s website, but they have not updated it. Any help would be greatly appreciated! Thanks, Jennifer

  55. Canadian Capitalist

    Jennifer: I don’t have such a chart but a RESP provides two significant benefits that make it the better option (how much better, I don’t know. I’ll try playing around with spreadsheets): (1) Taxes are deferred on portfolio income within a RESP and (2) you get the matching grant. My guess is you’ll end up with significantly more money by saving within a RESP.

  56. I have a group scholarship plan for my son and i did my homework on it,did you know that these plans had been around since 1972,alot of people and financial planners don’t know this.Financial planners and banks only really started focusing on resps since 1998 when the cesg came out,as they saw the potential for more business.the reason i am saying they are flexable is when you start a plan it starts off as a group plan,if your child doesn,t further his/her education you simply choose the self determined option and your interst is there for you to roll into your rrsps or withdraw subject to taxes.

  57. Canadian Capitalist

    Mario: Yes, you do have the option of transferring to a self-determined plan. However, you’ll get just your principal, grants and earnings on your principal. You’ll lose the enrolment fee (a significant chunk of early contributions) and earnings on your earnings (compounding growth). I don’t see how this is more flexible than a self-directed plan, where everything is under your control.

  58. I understand that I would lose my enrolment fees but if I were investing with a mutual fund company I would lose paying the MER fees which would be more than my enrolment fees that is if I was paying an Mer of 1.87%, thats what I am paying for my RRSP.

  59. Canadian Capitalist

    Mario: CST also charges you a MER. Administration + Investment fees add up to 0.60% to 0.80% plus a depository charge. This is in addition to the enrolment fee.

    You have the option of investing in low-fee mutual funds into a self-directed RESP (that’s what I do and the highest MER we pay is less than 0.50%). Of course, if you’ve signed up and contributed already, it is best to keep contributing.

  60. Neophyte Investor

    I stumbled upon your site while researching my RESP options. Everyone on this board seems very financially savvy. I, on the other hand, am not. Given my complete innocence of all things investment, I wonder if anyone might offer a recommendation for the best RESP for someone planning to simply park his investment in a bank and hope it grows. TD seems to be getting good reviews, as is Scotia Bank. Can anyone recommend one over the other? And does anyone know the MERs and admin fees for each bank?

  61. Neophyte,

    I was the original start of this thread with my question regarding fees (The baby arrived ok, BTW 😀 ).

    You’ll find that the MERs are explained in the mutual fund prospectus, so it’s not specific to an RESP.

    I like to use the Globe and Mail selector to do my initial research:

    ie this should get you a list of TD funds, sorted by MER:

    Then I go to the bank’s website and look at the PDF for the specific funds I’m interested in.

    Admin fees are listed throughout this post, but it would probably be best to get on the phone and make a spreadsheet with all the details yourself, in case things have changed recently.

  62. Mike,
    You said, “In the CST prospectus it lists the charges for administration and depository charges which total $20,288,831 for 2005 “. Can you detail how you come up with this number? I can’t figure it out. I am eager to find out the high fees CST charges (with proof). Thanks a lot.

  63. Anybody here who delt / dealing with Children’s Education Funds Inc. (CEFI) ? It’s another scholarship plan dealer.

    What is your experience?

    As some posted here I just started looking at what I signed in 1999. I’m pazzled to say the least. They have this line in the statement “Available for education”: this number dropped from $41,000 in 2003 to $26,000 in 2004 and it is going down every year.

  64. I guess it has been established that getting out of the CST is difficult and financially unwise once enrolled. For a guy like me who has little will power the fact that I would be penalized so much for pulling out is probably the only way I’m going to be able to put together any sort of savings plan for my child, so for me it works just fine

  65. Hi! I’m new to RESP, I need your help and I need your advice.
    I was registered in CST last month and I’m thinking of transferring to CET because an Agent told me that they give more rate of returns than CST. plus With the CET Group Plan, your child would receive all their EAP’s in year two upon entering the 2nd year of an accredited two year diploma program. (Childrens Education Funds Inc.)(
    An Agent told me that I can transfer to CET without loosing any money, unless I do it within 60 days. Thank you.

  66. Canadian Capitalist

    Jose: While I personally prefer the self-directed route over group RESP plans, I am unable to suggest if CET is better than CST. I use CST for illustration purposes and I have gone through their prospectus, but I must confess that this is the first time I am hearing about CET.

  67. Jose,

    You can check my page about me CEFI experience at

    Basically get out of the scholarship plan and open an RESP account in any bank. I think that only people who understand the scholarship agreement and prospectus really well should choose group RESP.


  68. Jose and everybody else,

    A great article about CST is here


  69. Canadian Capitalist;
    I just wanted to put in my 2 cents worth.
    I have a family plan, self directed RESP for my 4 kids. It is a trading account with TDW. I have stuffed it full of income trusts, because the growth and CESG comes out in the childs hands, esentially untaxed. No fees if over $25,000, however you do pay commissions on trades. [$29].
    Very pleased with it.

  70. Canadian Capitalists and others, thanks for your in depth analysis and comments. I find myself vehemently agreeing with you folks as you point out the flaws in the “Group RESP” programs.

    Do any of you know of ways to invest in an RESP plan with US$ and / or in the US equity market?

  71. what about setting up two portfolios? one with CST and the other with self directed?
    What is the risk for stopping monthly payment to CST?

  72. I’m just thinking out loud: the government grant money will have to be split between the accounts (portfolios) or only one account would get the grant. When you register an RESP you have to provide your child’s SIN. That’s the way to control where the grant money goes.

    The risks are outlined in the CST prospectus. The prospectus used to be on one of the links from this page
    until CST took care of it.

  73. Anyone heard of this -> USC Family Education Savings Plans. It is non-profit corporation. Is it Trust? Please advise. Thanks.

  74. This message is for edward to me it seems like you don’t know what you are talking about and for me I don’t see what the problem is with group RESPS.

  75. Mario,

    Please provide details and examples of how you think group RESPs work. My biggest problem with plan dealers is that I was lied to when I was sold this thing. But, please, never mind me, I’m new to this country…
    Just read some of the articles mentioned on my page:

  76. Edward

    Please share how you were lied to and your concerns about the resp tou have chosen.


  77. mario,

    I’ll share my experience shortly.

    For now check new posts here:


  78. Pingback: Investing in TD e-Series Funds for Your RESP

  79. Pingback: Investing in TD e-Series Funds for Your RESP

  80. Edward I am still waiting to hear how you were lied to.

  81. Edward I am still waiting to hear from you.

  82. Hello –
    just came across this site, researching the RESP subject. Great discussion!

    I have a few questions, or thoughts I’d appreciate your opinion on..

    We have to kids, one 7, the other one 17. When the younger one was born, we’ve enrolled both in USC Family Group Plan. We are not contributing much (we’ve allocated more to the older one, since we’ve started rather late) – therefore we could buy more units to get the full governmental contribution, for both, but we were wondering if we could create a new RESP plan outside USC and manage that independently. Any thoughts/advice?

    Anybody having had recent experiences with USC, any words of advice on how to best use USC process to pull out the funds for college/university education (we will be soon finding out what this RESP adventure will bring us, with the older kid)?

    A potential option … to pull the younger one out from the plan, and start differently, but had the same concerns as voiced here, about penalties, and the uncertainty that we won’t be able to make up for the losses. I guess this may not be the best idea?

    Thank you.

  83. Harry, the penalties for withdrawal are way to harsh with the pooled plans, which is their major drawback.

    I would suggest leaving the plans as they are now and maybe starting a new resp elsewhere (ie self-directed) if you want to contribute more. Yes, you can set up as many resp accounts as you want.


  84. Pingback: How To Open Up An RESP Account For Your Child | Quest For Four Pillars

  85. Thanks for the information. Im already in CST and have been for years. Im regretting my decision. Would it make sense for me to lower my payments and start a DIY resp in addition to the CST. Any help appreciated.

  86. I had CST reps come to work and convinced me to sign up for Group RESP. $200 per unit and all that glooming advise. But when I received statement, at maturity 50% of enrollment fee was no where to be found. The rest 50% stands if you ever missed a payment or not. Trying to run out fast…

  87. I am right now int the mits of transfering my RESP account with Canadian Scholarship Trust Plan. They are keeping alot of money and I can not figure out their calculations. They are deliberaly difficult. We were dooped. I will let you know how it goes. Ray I feel for you. You feel so foolish for not reading and understanding all the rules, but you would have to be a Philidelphia lawyer to understand.

  88. We have 2 kids, 17 & 13. When we started, the group plans were the only choices (as far as we knew), so we are with USC — & regretting. We switched to single payment a number of years ago, but with the “fees”, we lose a few thousand dollars. Also, over the years, the payouts are steadily declining — probably because there is a lot of competition now (& I think in the “old days”, the earnings of the children who did not go to post-secondary stayed in the pool, whereas a few years ago, they could be transferred to RRSP’s?)
    One thing I did not see mentioned is that USC (& probably other group plans) are set up to cover specifically 4 years of post-secondary studies. The EAP’s cover years 2, 3 & 4, & that’s where you get 1) your earnings & 2) the CESG’s. So, if my daughter decided to go for a 2 or 3 year college program, she’d be missing out on 1/3 to 2/3 of the earnings AS WELL AS 1/3 to 2/3 of the CESG that was given to her by the gov’t (the earnings being interest on our contributions & interested on the CESG’s) Seems corrupt to me, but the response from Revenue Canada is that how the CESG payments are administered is up to the RESP provider & the agreement we signed with them (nevermind that there WERE NO CESG’s 16 years ago). It seems they are getting away with keeping portions of our money in various ways!
    Final 2 cents — I’d never advise anyone to sign up with USG / CST / Heritage / whatever — the banks have various flexible plans — something reasonable for everyone.

  89. I recently invested with the CST plan for my son and had a very informed meeting with my CST sales advisor. I had heard about the concern over “high fees” and yet I wanted a safe investment for my child’s education, which is why I looked into CST. After doing the math on this investment, I am again more than satisfied with the plan. It is unfortunate that your criticisms are so lacking in the actual payout details of the plan, which are very impressive for a safe investment.

    I have spent some time now reviewing your blog on RESPs and referencing my CST prospectus. Here’s the actualities on the plan:

    My example is this:
    $1000/year for a newborn, investing 17 years.
    9.524 units purchased ($105/unit for newborn)
    $1904.80 in upfront enrolment fees

    Returns on units in plan, as per Prospectus 2007, p.66, “Amount of Education Assistance Payment per Unit”
    $600/per payout, 4 payouts/unit: $2400

    My example:
    9.524units x $2400 = $22857.60
    This is a projected interest payout on my plan for 9.524 units over the 17 years, based on last year’s performance.

    Now, let’s look at the principal return:
    – 1904.80 enrolment fees
    – 180.2 depository charges ($10.60/year)
    So there’s my principal return.

    Now CST fully guarantees the return of half of my enrolment fees, up to 100%.
    So my minimal enrolment fee return is:

    Now I add up all those figures to see my investment return at maturity, with fees taken into consideration. (and without grants from government)

    $14,915.00 Principal
    $22,857.60 Educational Assitant Payment return (investment return)
    $952.00 Enrolment Fee Return 50%

    Total return:

    Now I need to look at a compounding interest calculator to see what type of compounding interest I have received here. So I went to, and found the compounding interest calculator.

    Current Principal: $1000.00
    Annual Additions: $1000.00
    Years to Grow: 16 years
    Interest Rate: 8.7%

    Results: Future Value: $38,770.82

    So what I am seeing here is that regardless of those fees you keep struggling with, this investment grows at a compounding interest rate of 8.7%!

    The money chimp calculator doesn’t even take into consideration that in the first two years, $1000 isn’t fully going into the account because of the fees. So in actuality, your money grows higher than 8.7%.

    So unless this compounding calculator is wrong, all of us investing with CST have a very strong, secure investment on our hands. No wonder it quotes itself as “one of the most experienced and reliable RESP providers in the country” – it truly is offering Canadian parents a safe RESP investment for peace of mind futures and excellent investment growth.

  90. Warren Fishwick

    My question is this: I have a Family RESP Plan made up of an 18 year old and two 15 year olds. My 18 year old is going to school in Sept 2008. I have contributed $12000 for the 18 year old and have gotten $2400 in grant money. We intend to withdrawal all of her grant money as an EAP to use for her 1st semester. I have twin 15 year olds that will be going to post-secondary in a few years. My wife had this brilliant plan; you are allowed to withdrawal your original contributions at any time and there is no penalty if at least one of the beneficiaries is enrolled at a post-secondary school (which I will have in Sept 2008). So from what I can see after many hours of research is that we could withdrawal the $12000 out of the family plan come September when the 18 year old is in school and then reinvest it back into the plan but for my 15 year olds (say $5000 for each this year since this will give me my annual max grant of $1000 and another $1000 each in 2009) hence basically getting double grant money on the same $12000. Can this be done or am I missing some rules to stop this?

  91. Canadian Capitalist

    Shawn: I have a couple of comments on your calculations.

    (1) I’d strongly caution against extrapolating past returns to the future. Pooled RESP growth comes from just two sources – the investment returns, which is principally from bonds plus the extra boost from attrition offset by the fees in the plans. Bond returns were very strong in the past and it is unlikely that returns will be just as good in the future.

    (2) The EAP includes CESG grants and the growth of the grants. The grants are available for all RESP plans and should be included in your calculations.

  92. Well, here again you are not well informed, especially on point 2.

    (1) All funds show historical rates of returns and of course, there is no way of predicting the future. Where you err here is that unlike the more varying highs and lows of equities, fixed-income bond funds are much more stable in terms of performance.

    For example, the year-by-year investment returns for Group Savings Plan 2001, as outlined in the CST Prospectus 2007, p.31 are as follows:
    2002 – 6.2 %
    2003 – 7.7%
    2004 – 7.8%
    2005 – 6.7%
    2006 – 5.8%
    This steady 5 year rate is because the bulk of the investment is in long term provincial and federal bonds. In fact, my recent financial statement quoted that target future investment income range is in the 6-7%. That’s the target.

    Next point, you are not correct that the growth only comes from 2 sources: investment returns and attrition. The “growth” or rather what is correctly called the “Income from the EAP fund”, as per Prospectus, p.54, is actually made up of 3 sources:

    – Income from matured plans (Investment return- target 6-7% range)
    – Income from attrition and the General Fund
    – Donation from the Foundation (at the discretion of the Foundation. Mind you, I was told that the Foundation, being a non-profit organization, has to donate the surplus revenues back into the educational pools in order to keep their non-profit status and they’ve been not-profit since 1960! “Every year since 1987, the Foundation has donated surplus revenues to students. Total donations since 1987 have reached 33 million”p.3 Pretty good track record!!

    The donation from the Foundation actually makes up between 20-30% of the overall EAP payout.(p.30) No wonder you thought, incorrectly again, that the EAP return ($2400/unit) I have quoted above includes the grants. It doesn’t. Check out p.3 of the Prospectus – it is very clear that it doesn’t.

    (2) The very big err here, as I was saying above, is that the grant is absolutely not included in the EAP calculation. That is completely false information. The CESG (grant) and it’s interest is over and above the EAP payout.

    So it seems to me that you have extrapolated a lot of false information for the base of this 1 1/2 year criticism/blog against group plans and notably CST. It is unfortunate that no one with basic investment knowledge relayed to you all the mistakes in your arguments. It is very unfortunate that some parents may have even canceled their plans and yes, lost the enrolment fees due to this misinformed blog-site and some of your heavy-handed posters.

    So my question to you again is, based on last year’s returns and my simple calculations inputted into the compounding interest calculator, are we not indeed now looking at an 8.7% compounded return with the CST RESP?

  93. Canadian Capitalist

    Shawn: Looking back, there is an error in my calculations. The 11% figure I’ve used is the average return over those 17 years, so my numbers above should be ignored.

    Here’s my deal for you: if you post exactly how much an annual investment of $1,000 along with the CESG would grow into over 17 years, I’ll work out how much a self-directed RESP would have returned over the same 17 years. That would give an apples-to-apples comparison. Thanks.

  94. The main problem in your calculations is that the EAP at $2400 does not include the CESG and it’s interest. Although the Prospectus, on p.6 states that EAPs include the CESG and the bonds, this is solely for the purposes of describing the taxable income a child receives at maturity, which includes income on plan, general fund monies, grants and learning bonds. The CST EAP is clearly outlined in a table on p.30, stating :”The following table provides a breakdown of the sources of funding of Education Assistance Payments (excluding any donation from the Foundation) under the Group Savings Plan Series 1 for each of the last five years”. The table clearly does not include the CESG or it’s interest.

    I also know this to be true because I have a copy of my most recent financial statement which testifies to this fact.

    My son’s plan is for 19.1 units, in a monthly plan of $181.45.

    The Illustrated Maturity Value of my CST RESP Savings:
    Principal Refund $33,012
    Enrolment Fee Refund $1,910
    Canadian Education Savings Grant $6,974
    Education Assistance Payments (EAPs) $45,840

    TOTAL: $87,737 (plus income earned on CESG)

    It is clear that a 19.1 unit plan, at $2400/unit does yield $45,840. It does not include the grant – this is shown as coming in separately, as is the interest on the grant.

    This was all clearly explained to me by my CST advisor and it is also in the Plan Illustration that was presented to me during the meeting.

    I know you are really wanting to stick to your guns about the EAP payout of $2400 containing the grant, but the reality is that it doesn’t. To give out information that states otherwise is misleading and as you can attest, has created a whole blog of controversy about the CST plan. This is a great error on your part, but is understandable as the Prospectus is not very clear on p. 6. You have to read more of the Prospectus, specifically p. 30 where it is more clearly outlined.

    I called my CST advisor to make sure I was correct in my understanding and she attested to it, again, referring me to my annual financial statement from CST, where it is all there in black and white.

    I hope you take the time to read the Prospectus and clearly come to understand where you have been mistaken. Otherwise, call their Head Office, I am sure they can help you with this area of confusion.

    As much as you may not want to accept it because of all the efforts you have put in to discredit the CST plan, I hope you can humble yourself to the fact that you were mistaken and recognize that this is in fact a most excellent RESP.

  95. Canadian Capitalist

    shawn: I don’t believe I’m mistaken at all. I don’t mix past results and assume it will be the same in the future. However, let’s actually do an apples-to-apples comparison. What was the per-unit price for someone who enrolled in a group RESP in 1989 with an eligibility year of 2005? And what was the total payment per unit, including the CESG and the interest on the CESG for eligibility year 2005.

  96. Shawn, I’m not sure where you are getting these fabulous returns in CST, I’ve been in there with my daughter since 2002. I’ve stopped contributions to both my kids RESPs (I have a TD E-Funds one for my Son, 3, and the CST one for my daughter, 6) due to other financial trouble so I’m probably not the best in comparison, but here is a post I made a while back:

    “I actually do have a CST plan for my daughter. I’ve been contributing for just around 5 years now at $105 a month. Our first contribution was April 2002. That’s put us at about 59 months of contributing. If you do the math that makes my contributions about 6195, plus the 20% that the government should be topping off would be 1239. That means my 7434 has been working over 5 years to net me a whopping $7149.51.

    Yes, that’s not a typo and you read it correctly. I just logged in to my account to get the ‘Current Balance as of 28-MAR-2007′.”

    So that’s either a negative 3.8% return, or if maybe for some strange reason that doesn’t include my $2100 in fees it would be 24% in 5 years, or something like 4% return over the 5 years you’re claiming in the chart above.

    Also, the 2007 performance was fairly terrible, at 4% – fees.

    Plus, I’m not sure how CST skirts around the rules, but according to HRDC the EAP includes the CESG:

  97. Traciatim and Canadian Capitalist: The returns are found in the 2007 Prospectus, p.66, clearly stating the $600 EAP for years 2006, 2005, 2004. I called the CST Head Office and was told that the 2007 EAP was also $600, so you are looking at a return of $2400/unit (as a unit is paid out in 4 installments/EAPs, $600 per EAP) and this is the BASE
    INVESTMENT RETURN including attrition and the top-up from the non-profit Foundation. THE GRANTS ARE NOT, and I repeat, ARE NOT INCLUDED IN THIS FIGURE.

    Obviously, this makes sense as people are eligible for grants ranging from 20-40% as well as the Canada Learning Bond, so they don’t lump in all the grants together into the group EAP. Parents are going to qualify for different grant percentages depending on their personal income, so those figures come in separately. When the money is payed out to the child, it is called an EAP as on p.6, but it is the $2400 EAP plus the eligible grants received for that particular child.

    This should really make perfect sense to you now, and if not, as I did, call their Head Office at 1-877-333-RESP and ask about the EAP amounts listed on p. 66 of the 2007 Prospectus. They were very clear that the $600/EAPs did not include the grants.

    So, as I calculated on the compounding calculator, the CST plan that I have, Group Savings Plan 2001, is registering compounding returns at about 8.7%, based on the past performance of the last 7 years.

    You’ve given me more work, CC, to determine what the plan paid out from 1989-2005 since I have come to understand that that was a different plan and my 2007 Prospectus didn’t have the details on that plan. Needless to say, I called the Head Office Number again and they were very helpful. They told me that the plan running at that time was called the Founders Plan and the returns were paid out in 3 EAPs rather than 4.

    So the total EAP is $2500/unit in the plan, and again this is without the grants. The grants would again be done on an individual plan basis due to the grant categories. I also found out that the enrolment fees, still at $200/unit are not returned in this plan, and that they started returning the fees in 1991. And the price-per-unit at that time, for a newborn annual plan was $116/unit.

    For an investment of $1000/year starting in 1998, you would have had to purchase 8.621 units as units were $116 for a newborn. Now annual newborn units are $105.

    EAP return: 8.621units x $2500 = $21,552.50
    Principal – Enrolment Fees: $17000 – $1724.20 = $15275.80
    Grant: This will vary, so I would rather not add this into the equation so that we can solely look at the investment return of the Principal. This is the best option for comparing accurately.

    So we have $21,552.50 + $15275.80 = $36828.30

    Putting that figure into a compounding interest calculator for $1000/year for 17 years and you get a compounded return of 8.1%. That would be your apples-to-apples comparison. Then there’s the grant that came in 1998 and the grant increases of 2004, which will be dependent on family income.

    That pretty much sums it up. The biggest part that you are missing is actually looking at the EAP payouts, which give you the basis of understanding the actual compounding returns of the plan. I am glad my CST advisor was so helpful in illustrating that to me. I count myself to be fairly savvy at math and finance, so this was totally up my alley to pursue in it’s finer details.

    So my question is, where else can you get a safe, protected principal RESP investment with compounding returns in the 8.1-8.7% range? I couldn’t find it anywhere else, which is why I happily signed on with CST.

    Traciatim: As to your on-line account, what you don’t see is the realized and unrealized gains that are part of a bond portfolio. This was clearly explained in the annual statement mailing I received a month or so ago, and my CST advisor also told me to be aware of this when looking at my statement. And yes, those enrolment fees do come out of your account in the first 3 years. Regardless, your initial investment amount still grows at approximately 8% right from the start, as if the fees had never been withdrawn.

    As to the 4% return last year, my financial statement came with the Annual Report 2007, which gives us the finer details to that return. “In 2007, our investment performance for our group scholarship plans was 4%, which exceeded the all-government fixed income benchmark of 2.1%. This provided with $64 million in investment income and $31 million in value added over the benchmark”. Also, you need to remember that the 4% return is solely the value of the entire investment portfolio if they were to sell it at October 31, 2007, which is precisely when the markets, bond markets included, were being hit by the sub-prime mortgage crisis in the US. The actual bonds being held by CST are growing at much higher returns, as per what is shown in the Prospectus.

  98. Canadian Capitalist

    Shawn: Thanks for your detailed comments.

    Here’s what I did: I used the above numbers and a table of bond returns from 1988 to 2007. I assume that there is a fee of 0.5% for the bonds even though you can do better by simply buying GICs. I assumed a self-directed RESP contributing $116 for 17 years and no CESG. The parent withdraws the nominal contributions in Year 18 ($116*17 minus $200) and I assume that $900, $800 and $800 are withdrawn from the self-directed RESP.

    The self-directed performed significantly better than the group under the apples-to-apples comparison. The self-directed has $397.98 per unit left over. I’d be more than happy to share the spreadsheet with you, if you wish.

    What happens when you reduce the fees to 0.25%. You are left with $537 more in the self-directed RESP. What if fees were zero? (It can be with GICs because you can get higher returns by giving up liquidity). You’ll be left with $683 more.

  99. Hi CC,

    Well, I am having a few problems with your calculations.

    First of all, you said “I assumed a self-directing RESP contributing $116 for 17 years and no CESG”. I imagine you mean you took a monthly contribution of $116, is that so? Meaning an annual plan of $1392? If that’s the deal, then we didn’t compare apples-to-apples as the calculations I made above were on an annual contribution of $1000. The $116 I referred to is the per-unit price for a newborn – thus giving me the 8.621 units.

    What you need to chart is an annual contribution of $1000 for 17 years. I find it hard to believe that you are seeing higher results in a self-directed fixed income/bond fund than what CST can offer.

    What I have shown in my calculations is that the CST plan, both in it’s older plan running from 1989-2005, and in it’s newest plan, running from 2001, are yielding annual compounding returns between 8.1 – 8.7 %.

  100. Canadian Capitalist

    Shawn: No, the $116 is the contribution per year per unit. I did all the comparisons on a per unit basis. i.e. the self-directed RESP subscriber contributes $116 every year from 1988 to 2004 (17 years). In 2005, he withdraws $1,172 (similar to a group RESP withdrawal of contributions less $200 enrolment fee). In addition, he withdraws $900 in 2005 and $800 in each of 2006 and 2007. That’s the exact equivalent of what a group RESP subscriber would have experienced.

    I assume returns were the same as those provided by a benchmark of all Canadian bonds less expenses of 0.5%. If you wish, I can send the spreadsheet to you.

  101. Shawn: Congratulations on saving for your son’s education.

  102. Canadian Capitalist:

    I think it would be of interest for other parents to understand the comparison we are making here, so how do you propose you could better illustrate your side of the argument.

    Your side is that if you had opened an annual RESP plan of $116, (which we would do better in the comparison to say $1000/year as fixed-income investments yield higher returns with the higher contribution levels). So you open a fixed-income RESP fund in 1989, $1000 per year, and you continue it for 17 years. We know your principal coming back will be $17000. What is your growth on your principal in terms of dollars and then, what would have been the annual compounded return?

    As to my own research on the benchmark returns of Bond funds, back in 1989-1991, returns were in the 9-11%, but from 1992 onwards they went from 8% down to 4%. And we are putting in funds of only $1000 per calendar year, not all up front in 1989, so those lesser rates of return obviously will be affecting the performance.

  103. Canadian Capitalist

    Shawn: Let me second Bryce and say that it is important that we save for our kids’ education and despite our difference in opinion on which would be the best way to do that, let me applaud you for saving in the first place.

    The bond return data I used is the one available from Libra Investment here. The returns are total annual returns for All Canadian Bonds less an assumed fee of 0.5%.

    Okay, let me assume an investment of $1,000 every year for 17 years starting in 1988. In 2005, a principal withdrawal of $15,276 is made ($17,000 in contributions less the $200/unit enrollment fee). Moreover, in 2005, 2006 and 2007 EAP withdrawals of $7,759, $6,897 and $6,897 for a total EAP payments of $21,533. So far, this self-directed portfolio is exactly the same as a group RESP program.

    The question now is if any money left over in the self-directed RESP. If it is, the self-directed has better returns. If not the Group RESP is superior. The answer is, yes, money is left over – about $4,600.

  104. Just to be clear, apples-to-apples comparison here, the bond funds we need to refer to are government bonds, not corporate bonds, and the years invested are from 1989-2005.

  105. Canadian Capitalist

    You can access the spreadsheet here (silly me, I forgot about Google Docs):


    The bonds are a universe of all Canadian bonds (SCM Universe of federal, provincial, including investment-grade corporates). Current weighting of corporates in the bond index is 28%. Note that the investment policy of CST says that 20% of income from the portfolio can be invested in investment-grade corporates. Also, I believe this is th easiest comparison. Feel free to use long bond returns in the initial years and short bond returns in the later years to simulate how direct bond holdings are likely to behave. If I do that, I am left with $7,500 more.

  106. Well, that is clearly not an apples-to-apples comparison. We need to look at the annual coupon rates, not the annual evaluation of the portfolio. This is why you have varying rates in that spread sheet from 22.1 % to – 4.3 %!!

  107. Canadian Capitalist

    Shawn: The returns used are total bond returns when a portfolio of bonds are bought at the beginning of the year and sold at the end of the year. That’s a fairly good approximation of how a bond portfolio has likely behaved over 17 years. It’s also what an individual investor buying a bond fund or built a ladder of bonds would have experienced. Also, that’s exactly what a group RESP would have reported in its portfolio because they’ll mark the bonds to market and report the total value of the portfolio in client statements every year. If you believe that this is not an apples-to-apples comparison, we’ll have to agree to disagree and let readers determine which way is best for them.

  108. I’m new here and have had a very interesting time reading everyone’s comments, although I went a bit cross-eyed with all the numbers being thrown around….I want to put my two cents in. I think we need to look at the big picture here…..
    There is really no way of investing your money without some element of risk. So, the decision is how much risk you are willing to take. In my opinion, your children’s education is not an area of investment where you want to risk too much. This is not play money, this is money that has to be there when my kids go to school, so I take the view that this money should be invested with as little risk as possible.

    I went to University on the CST Plan, so it followed that when my children were born, I also put them into the CST Plan. I admit that I did not investigate other options because my experience with CST was good. However, I did ask questions when I put my kids in the plans and the answers were acceptable to me.

    As far as I can see, the only element of risk to investing in the CST plan are the enrolment fees. However, unlike self-directed plans where market fluctuations are completely out of my control, the loss of fees in the CST plan are completely under my control. I’m the type who weighs the risks and the control factor, and decides accordingly. As long as I choose an amount comfortable to me and I stick to it, then I will not lose those fees. Kids can do almost any type of schooling with an RESP (unlike when I went to school), so there is really no possibility that I’ll lose my fees because my kids don’t go to school. Besides, the only way this could occur, is if both of them didn’t go to school because plans and fees are transferrable between kids. If that were to happen, I’d be far too upset with the prospect of both my children not receiving an education, than any loss of fees. More importantly, no self-directed plan I’ve seen has returned fees, so I’d be in the exact same situation in a self-directed plan if my kids don’t go to school. Fees are part of doing business and I know banks and mutual funds take their fees in the form of MERs . In the long term, I’m sure the amount would be similar to what I’ve paid with CST.

    Now, onto the subject of returns…Quibble all you want about numbers, but this is your children’s education we’re talking about……I’ll take the good steady return over the possibility of a great return, but also the possibility of no return and loss of my original investment – which is the possibility when investing in any self directed plan that I know of. More importantly, I don’t need to overly monitor this investment, or worry about when I need to reallocate my asset mix – it’s hassle free.
    I see my annual statement each year and I’ve never seen negative growth (unlike my RRSP portfolio), so I’m more than happy with my decision. The investment returns listed on the annual report have been more than acceptable for a plan where my investment is protected.

    A last note regarding responsibility…..Wherever you invest, you have to take responsibility for asking questions. When my daughter was 11 years old, she wanted to put her birthday money into an RESP…. Since each of my kids has a savings account with the bank, we asked our bank about an RESP. I could not believe it when our bank said ‘no problem’ and then proceeded to tell us about their ‘balanced fund’ which turned out to be 50% equity funds…..Whether it’s a bank rep or CST rep, do not take anyone’s word or advice without checking into it. No 11 year old should be told to invest her gift money into equity based RESPs, just as no CST rep should tell you to invest in the plan without covering the potential loss of fees. Remember, there are bad apples in every pot – so ultimately, you need to learn the subject yourself. All these people make money off your investment – Bank reps have to make quotas and since their mutual funds generate huge fees, this is what they’re going to sell you on – no matter how old your child is. CST reps are commission based, so they make money as soon as you invest. I look at investing the same way I do when I get an estimate for a job on my home – call three companies and ask questions . You’d be surprised how much you can learn by asking questions.

  109. Canadian Capitalist

    Leo: It finally boils down to whether you want to DIY or not. If you don’t want to DIY, by all means, CST or the banks will help you with the RESPs in exchange for fees. If you DIY, you are not paying the extra costs in return for assuming more responsibility and managing on your own.

    My point is that you can mimic the exact same plan you get from a Group RESP with a self-directed RESP by investing in very low-risk assets like bonds, very low-cost bond funds and GICs and get as good, if not better results, with a lot of flexibility. If certainty of returns is what an investor is looking for, all she has to do is invest the annual contributions in GICs or bonds.

    I’ve noted else where that a self-directed RESP means the subscriber has responsibility over it. Playing the market with the college fund of a child who is a couple of years away from school is not responsible behaviour. Our kids are very young, so it makes sense that most of their college funds is in high-growth assets and we’re more than willing to live with the volatility.

  110. Canadian Capitalist: You are correct in your assumption that a group RESP will report the present total portfolio value in annual statements by marking the bonds to market value for that particular fiscal year end. This is why the 2007 statement I received showed a 4% return, whereas if I actually look at the coupon rates for the bonds, found in the Prospectus, CST is in the 5-7% range, and that is without all the top-ups.

    Where you are incorrect is your assumption that an RESP fund, such as CST, would have been selling and re-purchasing it’s entire bond portfolio every year, regardless of market value. As I found out, until 2004, CST always held it’s entire bond portfolio through to maturity as the whole basis of the fund has been in safe, secure investments with guaranteed principal. Your spreadsheet had years with negative returns, which would never have happened in the CST fund with it’s positive investment policy. Looking to the present, CST is now trading it’s bond portfolio but only when it is advantageous to the fund. Clearly, you will not find a group plan, nor a mutual fund company, nor an individual investor who would take the investment approach of selling the entire fund each year and the re-purchasing an entirely new fund the following day. To quote those returns as your mode of comparison is absurd and certainly not realistic for what we are discussing here.

    To then compare apples-to-apples you would have to look at the 2001 plan, with 6 years of investing starting with an 11 year old. If you take the time to do those figures, you will see that the CST plan far outdoes a self-directed plan with the returns you quoted in the spreadsheet.

    $1000/year/11 year old: 1.266 units
    Principal return: $6000-253.30 = $5746.80
    EAP return (without grant): 1.266 x $2400 = $3038.40
    Total return: $8785.20

    According to Moneychimp compounding interest calculator, it ends up being an 11% investment return, which easily counters your argument for self-directed in a more realistic apples-to-apples comparison.

    It is clear from this more recent example of returns, that your previous investment advice against the CST plan is incorrect and not well founded in logic and plan return outcomes.

  111. Except the problem with your example Shawn is that it doesn’t happen in reality. Look at my example:

    That means my 7434 has been working over 5 years to net me a whopping $7149.51

    I started in April 2002 and that quote was from March 28th 2007.

    Like I said, because of other financial problems we’ve had to suspend our RESP transactions for both children for now, but where are these fabulous returns your talking about over that period? My example is very close to the one you had shown above and nowhere even in the ballpark of the returns you claim.

  112. Of course, in my example we purchased 10.5 units for a new born, which cost us 2100 up front that gets no growth at all for 18 years . . . which explains a lot of the difference, since in your example their fees have less impact since you only have 1.266 units limiting 253.20 to the ‘no growth’ portion of the funds.

  113. Canadian Capitalist

    Shawn: This is getting nowhere. If CST marks to market its bond portfolio it would show the same negative total returns for 1994 and 1999 (Do you have the returns for CST for those years? Are you sure they didn’t get negative returns for those years?).

    A group RESP bond holder simply has to buy $1,000 worth of the bond fund every year from 1988 and sell in 2005, 2006 and 2007 to obtain the returns I’ve used (I’ve accounted for the expenses as well). This is an accurate comparison. If you feel it’s not, we’ll have to agree to disagree.

  114. Canadian Capitalist

    Shawn: The way you are calculating the yield is incorrect. You are adding up nominal amounts that will be received in the future and adding it up today. BTW, how do you know that one unit cost $790 for a 11-year old in 2001? Do you have the prospectus for 2001? How do you know what the enrollment fees was in 2001? Do you have prospectus of past years? If so, can you share the numbers?

    Even if I assume your numbers of correct, here’s how you should do the calculation:

    2001 to 2006 – contributions of $1,000 per year
    2007 – withdrawal of $5,746.80 + EAP of $600
    2008 – $600
    2009 – $600
    2010 – $600

    Internal Rate of Return = 7.9%

  115. We have a RESP plan for our daughter with Canadian Scholoarship Trust. The breakdown is as follows as of March 31, 2008. I’m feeling less comformtable with the structure of CST, the fees, the returns… We set-up a self-directed plan for our son last year and feel more at ease with that direction. Should we cut our loses with CST and try to make-up the loses over the next 14 to 15 years by switching whatever is left from this to a self-directed RESP/mutual fund portfolio?

    Plan Started April 2005
    Plan Maturity April 2022
    Contributions Net of Plan Fees = $2,492.20
    Canada Education Savings Grant = $1,196.98
    Interest Income = $125.33
    Enrolment Fees (18 units) = $3,600.00
    Current Balance = $7,414.51

  116. Speedy: Check your most recent annual statement from CST, sent back sometime in January or February. You fill find on page 3 a detailed summary called “Illustrated Maturity Value of your CST RESP Savings”. This gives you a much better idea as to the potential growth you will see in the plan. Remember that you chose a safe, fixed rate investment, with a portfolio consisting mainly of federal and provincial bonds. This means that there will be both realized and unrealized gains, which you will not see as interest income until those bonds are sold or mature. I received a little flyer with my annual statement explaining about the realized and unrealized gains, as well as the target investment returns of 6-7%, without including the Group Plan Bonus and Foundation top-up. It would not be wise to transfer your plan at this point as you have had enrolment fees come off, so your principal is minimal. Probably best to call your CST advisor and have them explain the plan and the growth to you. And take a look at your annual statement, page 3.

  117. Canadian Capitalist

    Speedy: It’s a tough question because if you transfer out, you’ll get back only the contributions made so far less enrolment fees. You’ll also lose the growth in the plan so far (admittedly it is not much at $125) but losing $3,600 is a huge hit. Even if you invest in equities in a self-directed RESP, I don’t know if you’ll ever make up a close to 50% loss of principal.

  118. Canadian Capitalist

    Warren: I think you can do that because the contributions are your money and the grants are made by the government for the benefit of your child. So, yes, I think you should be able to withdraw your contributions only to make new contributions to your other children.

  119. Canadian Capitalist: The way you are calculating the yield is
    incorrect. Again, more research has provided answers to your questions. CST unit prices are prepared by actuaries and are fixed, only varying slightly every 10-15 years. The enrolment fees haven’t changed for 48 years. So yes, 1 unit for an 11 year old, back in 2001 was $790, so your example, with $600 EAP per year for a $1000/annual plan is incorrect. Please see the correct calculations below, 1.266 units, $1000/annual, making EAPs at $759.60/year. (plus 50% of the enrolment fee returned, which at that time, they actually guaranteed 100% return)

    2001-2006 contributions for 6 years: $1000/year, @$790/unit, 1.266 units

    2007 : withdrawal of principal $5746.80

    2007: $759.60 EAP + 50% enrolment fee return $31.65= $791.25
    2008 : $759.60 EAP + $31.65 = $791.25
    2009 : $759.60 EAP + $31.65 = $791.25
    2010 : $759.60 EAP + $31.65 = $791.25

    This is assuming that the EAP of $600/unit, which was paid out as a unit price since 2004 remains the same, which it has been doing so until 2007.

    So now tell me your calculations for compounding interest?
    It is greater than the 7.9% you quoted?

    Also, let’s not forget that the parents don’t have to withdraw their principal right at maturity, they can leave it in to keep earning interest.

  120. Traciatim: The problem you are having with my calculations is that you do not understand how your plan works, which should have been well explained to you by your CST advisor. You would probably do well to question your advisor about your plan as they are the specialist for it. The Canadian Capitalist, who is probably very well informed in other investments, has proven here to be misinformed in several crucial areas in this understanding of the CST plan. This is unfortunate because parents like yourself are tuning in and coming up with even greater misunderstandings as to how their investment is growing.

    Let’s try this again and I’ll just quote directly from the CST flyer that came with my annual statement this past February:

    ” Understanding How your Plan Performs:
    We target a compound annual rate of return of 6% to 7%
    over the life of a CST Group Savings Plan you invest in for up to 17 years, but the income you see on your annual statements may vary from this target.

    Here’s how it works.

    Our investment pools accumulate two kinds of income: realized and unrealized.

    Realized income: When the investment manager sells a security or a security matures, the pools receive proceeds from the sale or maturity and earn, or realize, income. At the end of every month, we credit your share of the pools’ realized income to your individual account.

    Unrealized income: Securities that haven’t matured or been sold yet have unrealized income included in their value. Unrealized income is the difference between the security’s current market value and its original cost. Unrealized income increases the value of the pool, but isn’t credited to your account until the securities are actually sold or mature.

    Investing for the Long Term

    It’s important not to asses the performance of your plan by a single year’s return. Our investment managers actively buy and sell securities over the entire life of a plan to optimize returns while maintaining an appropriate level of risk. A CST Plan you hold for up to 17 years targets an approximate compounded annual rate of return between 6% to 7%.

    A Share of Income and EAPs
    In addition to steady returns and the protection of your principal, only a group savings plan offers your child a share of the income from plans that don’t mature or EAPs students don’t collect.

    Discretionary donations
    The Canadian Scholarship Trust Foundation (a not-for-profit organization), at its discretion, also donates back a share of surplus revenues every year.
    Since inception, the Foundation has given back over $36.5million to student’s EAPs, including $3.5 million in 2007, as a discretionary donation.”

    Traciatim, your other misunderstanding of your annual statement is that in the first three years, most of your principal is covering the enrolment fees, leaving you very little principal to earn interest on, which is why the returns seem so small in the beginning. You have to look at the bigger picture in the this investment as well as all the additional amounts that come into your plan at maturity.

  121. Canadian Capitalist

    Shawn: Thanks for pointing out the error. I did incorrectly assume the EAP as 1 unit, instead of 1.26 units. The $790 per unit is for a 11-year old joining the CST in 2007. The question is what was the per unit for a 11-year old in 2001 and what will be the payments in 2007-10? I’ve called CST and the rep on the phone could not provide me a per unit value for 2001 off the bat. But he did say he’ll request copies of prospectus for past years. I’ll let you know what I find out. Oh yes, I’ll publicly write that a group RESP is a better option if the numbers back up the claim.

  122. Shawn, I know exactly how it works . . . and exactly how my TD E-Funds account works too. My TD E-Funds account so far, even with the market falling apart, has been doing much better out of the gate because it’s not dragged down with 20 months of fees*. So they end up taking the absolute best compounding years and removing them from your returns . . . just like all those “If you started when your 30 instead of 35” retirement calculators CST forces you to start late. Then you also have to add the Administration Fees, Portfolio Management Fee, Annual Trustee and Custodian Fees, and the monthly payment fee then you ad up to performance that lags and you end up with statements like mine.

    So let’s say for instance you started at $0.00 and buy 10 units for a newborn. You pay the 100 bucks a month which costs $2000. I’ll just assume a nice easy 6% a year.

    Year one:

    Amount paid: $1200
    Principle: $100 (-100 for 10 payments – 50 for 2 payments)
    CESG: $20 (You don’t get CESG on the FEES!)
    Growth: $120 * .06 = 7.20

    Admin Fee: 127.20 * .005 = 0.64
    Trustee Fee: 127.20 * .00015 = 0.02
    Portfolio Fee: 127.20 * .001 = 0.13
    Deposit Fee: $10.00

    Final Balance: $116.41 (+1100 in fees) = 1216.41

    Compared to say, a TD E-Fund account:

    Year 1:
    Amount Paid: $1200
    CESG: $240
    Growth: 1440 * .06 = 86.40

    MER: 1526.40 * .0048 = 7.33

    Final Balance: 1519.07

    . . . .

    Yes, I can see how CST at 1216 is miles ahead of TD at 1519.

  123. @Speedy:

    I would really recommend you don’t leave the plan as well. I think Shawn, CC, and I all agree that leaving and losing your enrollment fees is almost never an option worth considering.

    Even though CC and I argue against CST it is still a fine plan with growth on your money and your kids will be better off than any child who’s parents didn’t plan ahead. Like the choice between the lesser of two evils I think CC and I just view CST as the lesser of two goods; in 18 years we’ll know if that’s fact or not.

  124. Canadian Capitalist: I appreciate that you are willing to look into this further. As to the 2001 Prospectus, you can find it on-line at Look under company profiles and then hit “C” to get a list of “C” companies, where you will find the Canadian Scholarship Trust Plan. Then scroll down the years to 2001 Final Long Form Prospectus and on p.41 you will find the Contribution Schedule where it costs $790/unit for an 11 year old. I agree that we only know the EAP for 2007 as being $600, and we don’t know the next 3 years future EAP payments. The projection that it will be $600 for the next 3 years was only a projected return, based on past returns in the 2007 Prospectus, which has it as $600 since 2004.

    What I also found interesting in the 2001 prospectus is that the EAPs, listed on p.15 are much higher – $740, $750, $800, $800, for years 1997-2000, totaling $3090/unit.

    How do you suggest we proceed, given these values?

  125. Traciatim: Sorry Traciatim, but you really don’t understand the CST plan. Of course you receive grant on the fees – you receive grant on your total contribution each year!!

    As to your other calculations, I won’t even speak to them because you are not seeing the big picture and you are stuck in the small details of the plan’s growth in the first year. If you took the time to actually read anything that I write, you will find that your returns are considerably greater than what you keep arguing against. I am pleased that the Canadian Capitalist is taking the time to properly research this plan with me here, so we can truly see what types of returns CST has been paying out.

  126. Shawn, Not according to the CST rep I called. I called to verify it before I posted because I originally had a comment of “I’m not sure if you get the CESG on the fees”. He told me that the CESG is only paid on amounts that go in your principle, which would not include the enrollment fees.

    Perhaps their staff also don’t know how the plan works?

  127. Actually Shawn, this makes perfect sense and explains my abysmal performance:

    “my 7434 has been working over 5 years to net me a whopping $7149.51” That’s because I assumed 6195 was my contributions and 1239 would be CESG, however, 2100 of that didn’t get the CESG so 819 was the CESG amount.

    That means that my 6195 + 819 of the CESG turned totals to 7014 which turned in to 7149.51. So I didn’t lose money after all, I just wasn’t given what would have been rightfully mine in a regular plan.

    It makes much more sense now, thanks for advising me to call CST.

  128. Canadian Capitalist

    Shawn: Thanks for the link to the prospectus – it explains a lot. You’re absolutely right that in 2001, a group RESP for a child who is 11 called for contributions of $790 per year for 6 years. Here’s the catch though: that plan wasn’t the Group Savings Plan 2001 that is currently open. It was called the Optional Plan and was sold during 2000, 2001 and 2002. Between 2003 to 2005, the plans sold were the Group Savings Plan. In 2006 and 2007, the plans are called Group Savings Plan 2001.

    I have no idea from the prospectus what the payouts for the Optional Savings Plan with a 2001 year of eligibility is in 2007 to 2010. But I can tell you this: take a look at the table on the left “Number of EAP Units” in the 2007 prospectus. Total payments (number of units * payment amounts) were a measly $104,520 over 3 years. Considering that the oldest child (12 years) who joined the Group Savings Plan 2001 in the year 2006 would not even be eligible for EAP until 2010, I wonder who these payments were made to. I’m guessing that the children in an older plan was switched to the Group Savings Plan 2001 who were then paid EAP but I can’t say for sure.

    I’m not willing to run any further numbers because these plans are so confusing and unless I can get real numbers from an actual subscriber, i.e. actual money contributed and actual money received, I suggest that it is pointless calculating imaginary returns.

    Traciatim: I’m totally confused because Speedy’s numbers suggest (the total contributions of $6092.2; 20% of contributions would be $1,218, which is close to the CESG number he has posted) the CESG is paid on the entire contributions. But, your numbers suggest otherwise. Maybe that’s what these pooled RESPs want: a thoroughly confused public.

  129. I’m getting concerned about the USC Family Group Plan that I have been contributing since 2000 for our 7 year old. Our contribution level gives us ~40 units.

    Looking at the prospectus, the amounts paid per unit is going down steadily: $520 for 2002, $505 for 2003, $490 for 2004, $400 for 2005, and $340 for 2006.

    More recently, the sales person that originally sold us the RESP has approached us and is trying to get us to sink in a one time $30K purchase into the Family Group Education Savings Plan. $30K would stop our monthly payment as we would reach that $50K level. The supposed value add for us is that because “we’re long time contributors, USC has a deal for you…”. So by sinking in a one time $30K, our units owned would jump from about 40 to 90 units.

    Sure, 90 units seem nice, but, the amounts paid per unit (shown above) are decreasing and the salesperson cannot determine for me what the value of a unit will be 10 years from now. In fact they have no idea…Also, looking back at my USC statements over the years, I noticed that the “Potential Funds Available for Post-Secondary” school has dropped by 25% between 2002-2006. Worse, is that for fiscal year 2007, they changed the statement so the potential funds available is not even listed!

    I’m starting to feel as though I’m talking to a snake oil salesperson. I have this feeling that USC is in trouble and they are trying to inject as much capital into their funds using both new subsribers and current clients like myself.

    Has anyone carefully looked into the current state of USC and their group RESP’s? Hopefully, someone can chime in and tell me that they are on solid footing.

  130. Well, looks like the statement “Perhaps their staff also don’t know how the plan works?” that I made last night is true. I called again and received the exact opposite response.

    Last night I asked if CESG was matched on portions of money that went to your enrollment and was told now. I re-asked the same question by asking that because the first 10 payments or so go directly toward enrollment fees I would basically receive no CESG and it was re-confirmed that no amounts on enrollment fees would be matched.

    Since CC was still confused with my numbers vs. speedy I called again today and the agent I talked to today was ‘very sure’ that the information I received was incorrect and that yes, we do receive CESG on enrollment fees. It’s unfortunate that I couldn’t remember the name of the person I talked to last night.

    So I’m back to the bitter side fence because I’ve lost money even though they claim it’s protected, rather than just not gained the money that should be mine anyway.

  131. Canadian Capitalist

    Growler: Personally, even with a self-directed plan, I won’t contribute a penny more than necessary to get the maximum CESG. Also, our RRSPs take a higher priority than education savings and if we are able to save more, we have the additional option of the TFSA starting next year. I explained why in this post:


  132. Canadian Capitalist: Yes, you have a good point with respect to contributing to the TFSA. I’m with you that the ordinal to contribute should be RRSP, TFSA, and lastly RESP. Especially if RESP’s are one of these group RESPs (such as USC). With respect to RESP, 2/3 of our RESP investments are self directed with 1/3 with USC.

    As for USC, I’ve sent a barrage of questions to the USC sales rep. When the questions are addressed, I’ll drop in and post the answers if anyone is interested.

    BTW, this is looking to be a great site to read up on investment strategies. I plan on making some time to do some more reading. Good to see a resource like this on the web.

  133. To: Canadian Capitalist & Traciatim: Thanks for your collective input. In our case, if we dropped CST and moved the plan to a self-directed RESP we’d lose the $3600 and small interest made. Your both suggesting that we stay with CST since the $3600 – $3700 loss is too steep, and that we might not make that up by moving to a self-directed plan. I fully understand that and am now considering not switching, however when I think about it, what does it “say” about the state of all RESP plans… that in the next 14 – 15 years, we would not be able to make-up $3600? That’s only $240 to $260 per year. A little depressing when I really think about it, if I’m understanding this fully.

    With two kids ~ one with ST and one in a self-directed plan, I guess we’ll see when they hit 18 who’s done better.

  134. Canadian Capitalist

    Speedy: Whether it’s better of leaving a group RESP is a really tough question as the answer depends on so many unknown variables. I ran some numbers assuming you are making a $2,000 contribution, a group RESP returns 5% and a self-directed plan returns 7% in the first 10 years and 5% in the later years. With a group RESP you’ll be left with $60K (I added back the $3,600 over the last four years) versus $62K for a self-directed plan. Note that the assumptions are guess work and depending on how you make the assumptions, you could conclude either way.

    What about a self-directed plan from the beginning (i.e. does not lose the $3,600 already contributed)? You’ll be left with $72K instead. The trouble is the highest costs to a group RESP are upfront, so it seems to be hard to recover from the hit.

  135. For those that are interested after call one and call two to CST resulted in conflicting information I e-mailed the customer service people and received a response that you do in fact get CESG matching on all funds deposited (up to the government limits) so the original guy that told me you do not was incorrect.

    I guess it’s just the fact that the fees ate up way too much of my money so that over 5 years we actually ended up behind the amount deposited because of them due to my low ($105) monthly contribution amount.

  136. One objection to a mutual fund RESP has been that (a) it might lose money the day the kid graduates and (b) that it might lose the principal in general.

    Has anyone got any experience with bmo ‘lifestage plus’ plans which have target end dates so they move from equity focused to cash-focused as the date gets closer and as long as you stay in the fund you are guaranteed to receive the highest value of the fund price? — At least as far as I can understand it that is. That seems to mitigate the above concerns, though it does have a 2.25% MER (that will decrease as they move to bonds, etc). ?

    Great, great, great conversations all the way through.

  137. Canadian Capitalist

    Novice: It all depends on the investment time horizon. Our kids are 2 years old, so they’ve got plenty of time to recover from any market setbacks. As they get closer to school, I’ll start moving more money into GICs with maturing dates matching the years they need the money. I agree that a child who is about to start university has no business being 100% in stocks.

  138. Hey Novice, I’m with CC on this one. When my son turns 10 I’ll start moving things from it’s heavy equity base over to bonds and possibly even to GICs at the end. Will it be perfect? Absolutely not. Will it be better than CST . . . maybe . . . who knows? The only way to know for sure is the day we cash out our plans.

    It’s really unfortunate that we’ve halted our RESP contributions while my spouse starts a business it would have made a very nice comparison since we do the exact same contribution for both kids just CST for the 6 year old and TD E-Funds for the 3 year old.

    Here is my question though, the TD E-Funds are all less than 0.5% MER’s the last time I checked, so it is really worth 1.75% of assets each year for 18 years to log in to your account twice a year and move some money around?

  139. Great points CC and T. What about the guaranteed value aspect — Hoopla?

  140. I couldn’t find anywhere that they explain how the guarantee works. In most principle protected scenarios there is a switch to bonds of a portion of losses to ensure the portfolio doesn’t lose again. However here I couldn’t find an example of how it works.

    The LifeStage Plus 2025 plan is currently holding:
    BMO Dividend Fund 44.6%
    BMO International Equity Fund 24.8%
    BMO U.S. Equity Fund 24.6%

    These each have MERs of 1.5%, 2.0%, 2.0%. So if you made a portfolio with a BMO Rep with the exact same allocations you would have an MER of:

    (1.45 * .446) + (2 * .248) + (2 * .246) =
    0.6467 + 0.496 + 0.492 =

    They are currently charging an MER of 2.35%, so you are paying someone an extra 0.715% just to buy three funds for you. Perhaps they are putting this money aside just in case between now and 2025 the fund over an 18 year period just happens to go down in value to cover their losses.

    Why not just buy the funds yourself and read their annual report and re-balance along with them if you like those BMO funds that much. You’d save a pile of cash and probably end up further ahead for it than the people that used the ‘set it and forget it’ LifeStage Plus accounts because you save on fees.

  141. whoops, don’t know how that 1.45% got in there . . .

    Should be 1.5 * .446, or 0.669, for a grand total of 1.657%. All the points still stand though.

  142. I have 2 sons who were enrolled in the USC Eduaction Savings Plan. One received all is money, but the other has a learning disability and has many difficulties with school. He can only take 1 or 2 courses per year. USC has given us back our principle minus fees and costs. They are giving us a hard time getting the interest and grants because the plan has mautured.

    What can we do, HELP.

  143. Canadian Capitalist

    Leo: I’m sorry to hear about your experience but I don’t have any suggestions to offer if they are following the rules correctly. You could try writing to them and appealing to their better sense.

    Novice: I think principal guarantees are over rated as they are in nominal dollars, which is not adjusted for inflation. In a diversified portfolio of stocks, bonds and cash, it is a virtual certainty that an investor will at least break even nominally; so why pay to insure against it.

  144. Pingback: Still Sour on Group RESPs

  145. Has anyone had problems with the CST concerning CESG.
    I just found out that my sons have only received the first year (1998) contributions from the CESG because in 1999 the government requested that forms had to be filled out to continue recieving the grants. The CST said they had sent the forms on two different occasions which I had never received, and now when my oldest son is 18 and going to recieve the capital they tell me this. No one ever tried calling or even writting a notice on the annual statements.

  146. Anjo – you are mistaken about the Additional CESG – if your taxable income puts you in the group eligible for the extra 10%, you need to send in an application form for the additional funds – it is not automatic and your grant stream will not increase once your tax returns are updated. Your plan provider should have sent you new forms in 2005, when the CESG was first indexed. I suggest you contact whichever dealer you are working with, to obtain the additional form, (SDE 0073) and get it filed as soon as possible, so they can go back and apply for the additional 10% of your first $500 in conributions for each year you qualified by income. Grant applications on previously deposited principal are only allowed to go back 3 years.

  147. CC & T – thanks for the push. I’m going to try to setup efunds account at TD Friday. I’ll let you know how it goes (I’m going in cold, I’m a long-term BMO customer). g

  148. Question for Shawn or any other CST clients:

    I also invested in CST for my daughter and I am having second thoughts when I read the following in their prospectus regarding the EAPs.

    pg 28 of new prospectus:

    “Students not qualifying for Four EAPs”

    A student who does not pursue a Qualifying Educational Program within the timeframe specified for payment of an EAP, or who pursues less than four years of a Qualifying Educational Program and who does not or is not eligible to exercise the right to transfer to a Self-determined Plan, will not receive all of the income which was earned on his or her principal. The Contributor wil not received the full amount of the enrollment fee refund of up to 100% for which he or she would otherwise be eligible if the student is enrolled in a Qualifying Educational Program for less than four years. However, the Contributor will always be entitled to a return of Principal”

    The problem I see with this is that if my daughter doesn’t go for a 4 yr degree we will lose growth earnings on part of our principal. If this happens then we stand to lose only part of the enrollment fee refund but also earnings on our money which doesn’t seem fair.

    If you switch to an individual plan you keep the earnings but lose the entire enrollment fees so, that is not a great relief either.

    The growth + attrition + enhancement/donations from CST make up for a good rate of return overall but there is a good chance that many of us will end up contributing to the attrition and enhancement fund which is the primary reason as far as I see for the higher returns and not due to miracle fund managers.

    Moreover, the growth shown in prospectus is pg 31 mention that the returns do not take into account expenses for plan admin, custodial and portfolio management fees.

    I have been in the plan for ~18 months now and still paying the front end enrollment fee as I upgraded my plan 12 months into it. I am now considering pulling out of it, we’ll take ~$600 hit for lost enrollment fees but I still think its worth it.

    I am considering staying with this for a few years and then convert to the one time option where I still have opportunity to get enrollment fees back + not have to pay anything further into the plan. After another five years into the plan if I make the switch, I would still keep the units and not have to pay anything until maturity (if what I have been told by my advisor is accurate, I am going to doublecheck with the head office).

    If you are 100% sure you won’t fall into the statistic that improves enhancement + attrition fund then go for group plan otherwise stick to something more flexible i.e. individual or family plans.

  149. Has anyone heard of a “one-time conversion” scheme in an RESP group plan . The pitch is that in the long run, more units will be allocated as opposed to the number of units prior to the conversion.


  150. Hi Allan,

    As far as I understand, the one-time conversion doesn’t change the number of units. You should ask your sales contact to explain the scenario in detail with some numbers. If you are unsure of anything, just ask them to show where it is documented in the prospectus and if its not explicit, try getting that in writing…….if its not true they will never give it to you in writing. As they say……..”If its not documented it doesn’t exist”.

  151. Canadian Capitalist

    Can someone explain how this “one-time conversion” works? There is no mention of it in the prospectus.

  152. Wow, it took me around 30 mins to read all this post… 🙂

    Guys, straight to the point: Tho kids (6 and 10). I was reading about the maximum contribution over the year, and it says I can only save up to ~$50k/kid, but the money I will need is around $80k/kid. So??? Besides, looks like I’d rather get a DIY plan, but not sure. Comments welcome.


  153. Ozzy, please stay away from group RESP plans. As simple as that.

    Keep in mind that your contribution room is limited to the amount you stated, but your earnings and the CESG don’t. If you wanted to set each child up so that you have contributed 50K a piece at the time they were 18 then you would need to do $6250 a year for the 10 year old and $3572 a year for the 6 year old. That first $6250 at 5% for 8 years will be about $9200 bucks when the child needs it. The first $3572 at the same 5% will be a shade over $7000.

    If I were starting now, however, I would probably put the minimum amount in to the RESP to receive the maximum government match and put the rest of the funds in to a TFSA account instead (unless you have other plans for the TFSA). The TFSA will be more flexible in the end and will have no penalty if your children decide not to go to school. Though you would have to have some will power as to not withdraw the funds to buy a new car when your kids are 16 and hate you for not letting them go to 😉

  154. Canadian Capitalist

    Ozzy: For saving for a child’s education, a RESP is better than all other alternatives for one reason: the CESG. IMO, it is better to contribute enough to a RESP to get the maximum CESG ($7,200 per child) which would mean a total contribution of $36K over 14.4 years (or less if you have grant room available). It may be better to save the rest in a TFSA (starting next year) because it is more flexible.

  155. T & CC, thanks for the comments.

    I don’t understand (newcomer… 🙂 ) is what you mean by “or less if you have grant room available”. Besides, what does the $50k mean? ( It means I can’t contribute more than $50k? My concern is because I was doing some research, and the estimate college cost would be ~$80k/child. If that’s the case, should I save the diff – $30k – in a TFSA?

    BTW, the TFSA advice is solid, great.

  156. Canadian Capitalist

    Ozzy: The $50K is the maximum you can contribute for one child. You can contribute the entire amount in one year but the maximum CESG is limited to $1,000. Why would someone then contribute the entire $50K in one year? To take advantage of tax deferral because any growth inside a RESP is not taxed until withdrawn.

    Every child is eligible to receive a CESG of $500 (for a $2,500 contribution) every year. If a contribution is not made, grant room accumulates. Let’s take an example:

    Child born in 2008 – RESP contribution = $0, CESG grant available = $500
    2009 – RESP contribution = $0, CESG grant available = $1,000
    2010 – RESP contribution = $5,000, CESG grant = $1,000 CESG grant available = $500

    I’ll probably make a post out of this. Meanwhile, you can check other posts in the RESP category. They contain links to other sites that may help you as well:

  157. CC, thanks again. Last question, as a newcomer, am I able to catch up with the previous contribution and still get the CESG for those previous years? For example:

    2008 – My son (10) – RESP contribution: $0 – CESG grant available: $4,600 aprox???

  158. Ozzy – my understanding is that you can go back about 8 years for unused contributions – call your bank to check.

  159. Please email me if you are wanting to set up a RESP with no cost to you, with up to 40% interest every month from the government.

  160. Only if your located in Ontario please.

  161. How are the index funds doing now? I guess the recent downturn in the economy would have scared more than a few people.

    Canadian Capitalist, any ideas how to deal with this kind of scenario?

    Plus a quick note for Ronice, govt. doesn’t pay interest, they only give a grant, your statement is misleading.

  162. I would like to know if anybody has opened an RESP account with Questrade? (or other discount broker).

    I am thinking to buy CBD and CBN from Claymore Investments.

    I notice there is a $4.95 fee for every transaction.
    It will be costly if I buy monthly for both (CBN and CBD). ($4.95 * 12 = $59.4 * 2 = $118.80)
    If I buy yearly, I won’t be able to do dollar cost averaging.

    Is this a good approach? or Should I just buy TD e-funds?

  163. Does anybody knows how Industrial Alliance RESP plans perform as compared to TD-efund and CST/USC.

  164. Abbas, the Diploma Elementary RESP fund they have looks like a product that you could do yourself over at the TD E-Funds simply by matching up the fund names and setting your deposit accordingly. The thing that caught my eye over there with a quick peruse was this

    “Management expense ratio (MER): 3.26%”

    There can only be one expression to describe that fee . . . HOLY POO!

    That’s nearly 10 times what you would pay for fees at the TD E-Fund account for the MER. However, a person would have to sit down and figure out with all the variables involved that one plan may be better than another. I was on their web site for all of 10 minutes . . . It’s my opinion that much longer than that should be spent securing your child’s future.

  165. I really need some help regarding USC. I have 2 kids and make $100 payments for both kids. I have know realized how many lies the sales reps told me. Should I cancel my plan and take my contribution less fess or is there another option for me. If I continue, say by making minimal contributions, will I receive all my contributions once my kids attend post secondary in the first (will I still have to pay enrollment fees ). I need options. I really don’t want to pay the enrollment fees, is there any way around this, or do I have to pay these fees regardless of any option I take.
    Thank you

    • Canadian Capitalist

      Aman: Check the prospectus. The enrollment fees are front loaded and are charged up front. I believe these Group RESPs promise to refund a certain portion of the enrollment fees when the child attends university. If you withdraw now, you forfeit the enrollment fees paid already.

  166. Aman: If you have paid enrollment fees for all the units you purchased then there could be no way out. If you are at an early stage then you could cancel the remaining units and keep the ones that are paid for already.

    I did that for my daughter’s group plan but it was not with USC.

    Depending on the terms and conditions of the plan (refer to prospectus), there are also some options of converting ongoing payments into a single lump sum payment after the plan has been active for a certain number of years and not contribute any further. Again, I’d refer to the prospectus as suggested by Canadian Capitalist.

    If you wish to contact me directly to discuss anything you can do so at iktidar-at-yahoo-dot-com

  167. Hi, I’ve been reading your contributions, I feel obligated to let those of you know who still believe in the Canadian Scholarship Trust Plan to be very careful. I too purshased a scholarship for my daughter at her birth. I paid $100./month for 17 years, never missed a payment. Now when I need the money for her tuition, there is no payout because of the strike at York last year. Apparently if you do not complete a full year of study each year, there is no pay out the next year, no exceptions at all. I petitioned, call, etc. to no avail. Rules are rules. I never knew of these rules. All that I was told was that she had to be enrolled full time in a university and she is. So now I am having to take out a loan to cover her tuition and living expenses, while her share goes into the pool for others, even though my daughter is in school. So those of who out there who still believe in CST, BEWARE!!! Plan on having your child go full-time at all times. Heaven forbid that there is a strike or that your baby is ill and has to take sometime off mid-term. Please do not purchase or invest in CST for your child’s education.

  168. Canadian Capitalist

    @Rosamaria: I’m just curious. Your contributions work out to $20,400 over 17 years. What is the payout from the CST over 4 years? Would you mind sharing that information?

    It is disgusting to hear that CST would not payout due to the strike at York. I haven’t seen coverage of this in the mainstream newspapers. I wonder why — it seems like a terrible injustice to me.

  169. Hi CC

    I have been reading your column for a few weeks. Now is confession time.

    I made some family RESP payments through a very trusted friend, did not even ask formailities, just signed the papers right away and paid a huge amount every month. After about 10 months I realized that I have been deceived.

    I dont want to confront him till I have full information. Could you please help?

    My questions are:

    1. If I say no now, will I get any money back?
    2. If I ask for $ 50 or 100 payment per month, will previous payment still count?
    3. Looking at high prices of univ studies, this amt will not be sufficient. Should I start a self-directed RESP with my present one?
    4. Or just have a self-directed RESP, I dont know ABC of finance – so it might be a huge risk.
    5. I tried reading the prospectus, but cold not understand a word. What if there are some more loopholes and I do not get full advantage of money later on.

    I’m a single mom with 3 kids. U can see how crucial this topic is to me. Please advise.

  170. Hi, I’ve been reading the entries and I’m really happy I came across this information. Thanks!
    I recently started researching RESPs and I met with a CST rep. They mentioned I would have to setup my RESP before end of year or forfeit the government grant and given that I have travel plans around Xmas and did not feel like I had ample time to research I almost signed up! After reading these entries I decided to call the CESG (Canadian Education Savings Grant) and they said I did not need to open the RESP before end of year. The Grants can be carried forward….that was very deceiving of the rep and I really have my guards up now.

    However, I still needed to compare the options. I understand the restrictions and lack of flexibility of the group plans but just trying to compare the returns. CST estimates that contributing 2500$ per yr will yield a total of about 93k (principal + EAP)

    To compare to the self directed option I did some rough calculations and using a 5%/yr return got about 79k , using 7%/yr got 97k and using 10%/yr I got 132k. That leaves me with 2 questions… is it easy to generate 7-10% annual returns & is there any way to find out what recent payouts have been for Group plans?

    Any comments or suggestions would be much appreciated.

  171. Mel,

    I will try to help you, realizing that any decision you make is your own, and without knowing your personal circumstances, I can’t say what is best for your family.

    I would first like to say that regardless of what you decide to do, you should report the CST rep to your provincial security commission. This person needs to be shut down, and their lies will hurt others in the future. If they lied to you about that, what else were they lying to you about? I realize that it might be a pain, but think of it as your civic duty. That person knew that they were lying, and they deserve to be reported.

    Case in point, their 93k projection – it was just that, a projection. I hope that was clearly explained to you, as past performance is not necessarily indicative of future returns. It is their best guess, using past performance, and future expectations. It may be more, it may be less, but don’t think of it as a guarantee.

    On the same note, to ask anyone “is it easy to generate 7-10% annual returns” is the same as asking them if they can tell the future. No one can tell you what any investment will do, and there are different levels of risk to each one. Some of the folks who post here assume that everyone has the same risk tolerance that they do. Also, if you had asked someone that same question 14 months ago, the answer might have been different. Every time that there is a stock market correction, there is a tendency for some people to re-evaluate their risk tolerance, and usually they start to prefer less risky investments. Make sure YOU know your risk tolerance before you talk to a planner. (they usually make more if you invest in a riskier fund.)

    If you have seen my other posts here, you will know that I work for a Group plan company. I started after I researched for my own children, and realize that it is not for everyone. I personally love it, and that is why I started to work for them. As far as go with CST, as to Rosamaria’s post above, CST can be quite restrictive. There is a plan that is much more flexible. My advice to you is to go to and download the prospectus for CST, USC, and Heritage’s group savings plans. Don’t bother with the others, as they have some ‘catches’ that you don’t find out about until the end, and even thought I specialize in this, I have a hard time finding those key phrases in the other companies prospectuses.

    Once you have the prospectuses, search out their completion rates. This is the percentage, of the children who are eligible, who actually receive all of the money that they were supposed to get. Looking at the ‘scholarship payouts’ might lead you to a plan that has higher payouts, due a less flexible plan. (Less flexability means that your child might not get all of theri own money, like Rosamaria above. This money is then in turn given to other children, as part of the Schoalrship payout. Makes the returns look better and this obviously is good for their sales, but bad for parents who can’t ‘jump through the hoops’ and don’t get their money.) The group plans are not all the same, and one is much more flexible that the others. They all claim to be the most flexible, which is why I steer you in the direction of the completion rates. (closed matured plan completion rates) These can’t skew the truth. I for one want all of my money, regardless what my child decides to take in school.

    I wish you well in your journey, and hope that you are well served by any decisions that you make. If you have any questions that you would like to ask me, feel free to email me at candianfinancialwizard-at-gmail-dot-com although I would prefer to answer them here, as others might have the same questions that you do.



  172. Canadian Capitalist

    @Mark: I want to thank you for adding to the discussion here. All too often, I find Group RESP reps to have limited understanding of a product they are recommending for others here. Therefore, it is refreshing to hear from someone like you. Thanks for the tip on completion rates. I’ll look for it in the latest prospectuses.

    @Mel: I personally think that 7 to 10 percent is way too optimistic for the securities that Group RESPs are invested in: bonds. Long-term bonds are yielding 4% currently and who knows what future contributions will earn. I agree with Mark and believe the agent is misrepresenting the product.

  173. Hi CC,
    I just picked it up this question from another forum, where it remains unanswered. Can you figure that out?

    Smith: Feb 21 2010
    Is there anybody who could help me and explain the following numbers? The numbers are from Canadian Scholarship Trust Plan statements and they “indicate” how much this plan should be worth at the time my kid is going to need it. I just looked at my statements from Dec 31 2006 to Dec 31 2009.
    Year: Money
    2006: 20000
    2007: 14500
    2008: 13800
    2009: 13000
    Perhaps things are obvious? There will be much less than what we invested. And we didn’t even exit the plan.
    CC, to Mark’s point, a projection is just that: a projection. But payouts (and therefore value of the plan) would have to depend on how the plan performs. Are those numbers an indication of a dramatic and steady decline in plan performance over the years, and predicted decline for future years?
    How would you explain such a drastic drop in predicted value from 20,000 to 14,500 between 2007-2008?
    Is it possible that CST is wooing future subscribers with out-in-the-sky projections that are later “adjusted” to more realistic numbers?


    • Canadian Capitalist

      @Ann: There is limited data here to draw any conclusions. It is not clear to me if Mr. Smith is extrapolating the decrease to state that “there will be much less than what we invested”. It’s also not clear to me how CST arrived at the estimates posted in the comment. How does CST estimate future interest rates on future investments? It’s hard to comment without having a bit more insight.

      I’ve stated this elsewhere but I’ll reiterate. Group RESPs invest in bonds and the best you can expect from bonds is what they are yielding today. i.e. 4%. With future rates unknown, it is hard to estimate how much a Group RESP will be in the future. I’m not sure how CST estimates these numbers.

  174. Ann,
    You are correct that CST may be ‘wooing’ people, but the fact is that safe investments have been preforming at lower rates now, than in the past. On that note, I will use the expression, ‘there is noise in the numbers’. I really have a hard time seeing a jump from 20,000 to 14,500 over one year. It is possible that this information is incorrect. But assuming that these numbers are accurate, I will throw out a few ‘guesses’.
    First of all, the CST plan in question was started in 2001. (How long they have been around is godd indication of their longevity, but no indication of what the current plan being marketed will do.) When showing their projections, the group plan companies use the scholarship payouts of today, to predict what could be there in the future. (Bear in mind that at no time is this a guarantee, but at the same time, what other info can you use to predict.) The problem with the CST 2001 plan, is that it is very new. Scholarships are made up of interest, interest on grant, grant, attrition, and enhancements. (this is not all that is paid to the family, just all that is included in the scholarships.) The enhancements are the ‘noise’ that I was talking about. Basically, if a plan was started in 2001, how many children are using it to go to school during 2006- 2009? Not many. This allows a plan dealer to (for lack of a better word) ‘aggressively’ enhance the returns with it’s extra money. This obviously cannot be continued as the plan ages, and more children start going to school. Historically, at this point, what some Group plans do is stop the sale of the current plan, and create a new one, starting the process anew. (You be the judge if this is a good thing.) On that note, while it is important how long a plan dealer has been around, it is probably more important how long the plan that you are looking at investing in has been around. This will mean that the numbers that they are showing you are more accurate.
    Another guess is that, because they are using today’s numbers to predict the returns, the percentage of children who are able to use the plan is increasing. If true, this is a good thing, as it might show that the plan is not restrictive, or that more children are deciding to go to school. (Post secondary school is more important that ever, and increasingly moreso.)
    Not saying that anyof this is the exact reason for these numbers, they are just my best guess. It could be because of other factors.
    Either way, I would hazzard a guess most scholarship plans are probably showing at or near the lowest that they will show, barring some unforseen aspects in the market. (Like that ever happens – lol)

  175. Thanks Mark and CC, I appreciate your comments.

    It looks indeed that for one reason or another, CST “projections” for a plan value made years prior to plan’s maturity are worthless for parents considering buying into the plan, and should never be used as a part of marketing pitch.

    The informative value of the “projections “ is even more misleading for parents – plan owners who are trying to guess whether they are saving enough for kid’s education. Surely nobody can PREDICT future returns, but if the illustration of the plan value would give parents two scenarios (e.g. one based on low returns for the type of investments CST is engaged in, and the other based on the much more optimistic CST calculations based on previous year’s EAP – or whatever else makes best sense) then maybe parents would not need to face this kind of shock like in Smith’s case.

    I wrote down the numbers from my kid’s CST plan. I was shaking my head year after year. The numbers are not as bad as Smith’s numbers, but still show that many parents will have a rude surprise. My plan is the Founders plan that I bought into January 1, 1994 with 12.8 units, and added 9 more units November 1, 1997. The plan was closed in 2000, so it is not one of the “new” plans that Mark described.

    Here are my numbers from CST statements (missing 2003 and 2007):

    Year Net Contributions CESG EAP Plan Value
    2000 49,010 8,118 80,987 138, 115
    2001 49,010 7,896 73,902 130,808
    2002 49,010 7,757 73,498 130,265
    2004 49,010 6,998 62,130 118,138
    2006 49,011 6,400 58,860 114,271
    2008 49,012 6,001 45,780 100,793

    Shocking drop, isn’t it ? I know that this is not real loss but paper loss of “projected” value, but still what is the use to give parents such numbers? Or worse, hooking them up?

    Another thing that makes no sense on my statement are CESG. If the limit was always $7,200, then why did they show $8118 one time? Was it supposed to be the grant with interest?
    Most importantly, why would the total amount of accumulated grant DIMINISH every year? Is CST loosing grant money or what. I contribute $300/month since 1997, so I must be eligible for the maximum grant of $7,200. Am I mistaken there?

    CC, if you can comment on my numbers, it will be educational experience for me and surely other parents who are lost in the complex RESP world. It’s sad that one can never get reliable information at source. Your blog is a great thing.
    By the way, I emailed CST, and they emailed me back a routine slogan directing me to their website. Go figure.

    Thank you,

  176. Ann,

    My comments to your numbers would be similar to my above comment, combined with CC’s imput. Withough further info, it is guessing.

    I just wanted to ‘guess’, judging from the numbers you posted, that the GESG principal was always included in the first number. The CESG interest is the number that started at 8118. They can’t lose your CESG.

    Other than that, my above post should cover some of your questions.


  177. Hi CC

    Just received our CST Plan statement for our boy. 7.5K invested – and only $1.5 is principal, the rest all deducted as fees. This is a shock to me – and makes it look like a scam.
    Obviously we thought it a good way to make sure we invest, but reading the above, it seems like there are even more deductions to come – is that possible?
    Are we stuck here now(for the long run), having lost our investment to “enrollment fees”?
    What would you do?


  178. I started a CST plan for my daughter a few years ago, paid more than $2000 in fees. I am taking the bitter pill and moving it to Mutual Funds. This may not be suitable for everyone since in my case I moved into this field in a professional capacity last year and will be able to make up for at least some of the lost fees from commissions I get from the MF account and hopefully get a better return than CST funds; I still have around 15+ years to invest. Its very frustrating and I wish I had never signed up for the group plan.

    Will……….recouping $6,000 in fees may be hard. CST had a refund of fees option which they changed I believe, you may want to check with them if that applies to your plan (they may), lets hope you can get that back at the end.

    General comment…….

    One suggestion for new and existing plan holders……….read the prospectus before signing up or deciding to stay on with any plan/product. You can get a pdf copy from In the document, you can search for keywords like “fees”, “redemption”, “transfer”, “penalty”, “EAP” etc… see if any terms are too restrictive and the fees schedule etc..

  179. Hey Will, keep in mind that the enrollment fee is deducted from the amount on your statement but you should receive most, if not all, of it back when the plan is used to pay for schooling.

    If you are already in the plan the best bet is to continue. You can talk to your rep or call their customer line on their website and talk to them about options to pay out the plan, or convert from the group to an individual plan, but make sure you get all answers about fees or penalties before you make any changes. If you leave the plan you will forfeit your enrollment fees which generally is why it’s better just to continue, since that kind of a loss is hard to recover from even if you make fantastic returns elsewhere.

  180. Canadian Capitalist

    @Will: I agree with Traciatim. I believe CST guarantees a 50% return of enrollment fees (but not the growth on it). Since Group RESP fees are front loaded, I think that withdrawing from the plan incurs such a hit that will be difficult to make up even with riskier investments. The best option for a subscriber who has signed up and is past the 60 day cooling period might be to stay the course.

  181. Just a thought on breaking out of the CST type plans………as noted above, all of the initial payments are used to pay the fees so, for smaller contribution amonths e.g. $100 or so one could still get out of the plan in the early stages. For someone who has paid for longer duration or a larger sum, it may be worth to stay the course as Canadian Capitalist suggested. There is also a transfer fee + depository charges + forfeit of growth on principal upon transfer which makes transfer less feasible if someone is in the plan for a longer period.

    Another thing which I found a little odd is that for CST under the group plan option the EAPs are only available in 4 installments which means if a child takes a program that is shorter than 4 years of study they may not get all the payments. The solution to that is to convert the plan to an individual or family plan rather than group……in this case there is no enrollment fee refund available.

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  183. I just opened a Global educational trust plan RESP for my 7 month old baby. Thanks to what I learned here, I think I am going to close it.
    My plan is to open a self directed RESP in TD or Scotia Bank and just keep buying indexed stock like QQQQ.
    I would love to read what you guys think about this idea.

    • Canadian Capitalist

      @Jafar: By “index” we mean a broad-based, well-diversified stock market index. The NASDAQ Composite is technically an index but as an investment, it is mostly a technology fund.

  184. thank you for replying Canadian capitalist. I think my post was not worded properly. I meant to say that I am planning to buy stocks that represent NASDAQ or S&P 500 or…
    Is this a better plan than buying mutual funds?

  185. I am sure you know about QQQQ .

  186. I’ve been looking to open RESPs for my kids. From what I’ve seen from TDs website the only plan that supports the CLB requires to invest in GICs. Am I missing something?

  187. say you didn’t use the money from the Scholarship Plan your mom had set up for you and lost money. You should have reconsidered going on further to post-secondary education. You might have at least learned how to spell ‘recommend’…duh

  188. John-Paul Federico

    I was leaning towards investing in TD e-Funds as part of my daughter’s RESP. However, I was discouraged by the $50 annual fee. Is this fee worth paying given the low MERs?

  189. Hi, I stumbled upon this website discussion while researching on RESP’s for my 2nd child. Has anyone dealt with RESP from Industrial Alliance? I set up my older child’s RESP account with Industrial Alliance but I’m looking into other options for my 2nd child’s RESP. With my older child, I had set up an individual plan but now that i’m considering a group plan with IA, I was told that I would have to forfeit the bonuses that accumulate in the plan if I do choose a group plan. Does anyone know what the penalties/fees are with IA for withdrawing from the plan?

  190. @Lainie…..from your description it looks like you have IA Diploma RESP plan. I think the penalty for closing this RESP account is 18 X 50% of the monthly contributions + you are forfeiting the future bonus as well. I hope I got this right, this can be confirmed from the information folder. You should check with your agent if IA waives the penalty if the account is switched within IA. Keep in mind that the MER cost for IA funds is also quite high which can add up over the years.

  191. @Iktidar: Thanks for your response. Unfortunately, when I had set up my older child’s Diploma RESP, I had purchased it from IA through a family member and i was rather ignorant at that time, of the fees and the penalties attached. Now, with my 2nd child, I was told by my agent that if I do switch within IA to a family plan, I will lose the bonuses accumulated in that plan. You are correct in that the penalty is at the maximum 18 months x 50% of mthly contribution. I am 3 years into that Diploma RESP, do you suggest that I remain in that plan? Also, can I set up another family plan elsewhere and name my 2 children as beneficiaries, and at the same time, keep my account with IA?

  192. @Lainie. Whether to stay or leave is a tricky situation. Having stayed in it for 3 years you basically stand to lose 9 months of contribution by breaking the plan, that may be a huge hit depending on how much you are contributing per month. You can setup a separate family plan elsewhere, having more than one RESPs for a child is allowed so, you could keep the IA going in parallel.


    One more thing, stay away from the scholarship type plans. Its a high commission product so is often positioned as a great product by reps who either don’t know any better or are looking to increase their unit of sale. For my experience with scholarship plan you can refer to some of my comments above.

    For choosing an RESP provider you can refer to the following link

    There is also good information shared by others in notes above.

  193. MikeinVictoria

    Hi CC thanks for the terrific site. Yet another RESP question. I have a CST RESP for my first born who is now almost nine. The plan has been in effect since 2002 and is worth $17,782 with $3600 of enrollment fees. We started the plan when our finances were very tight and we knew we needed to be forced to save.

    Now i have another child who is 4.5 and i haven’t started saving for her, and a we have a baby on the way. Having equal funds for all three is important to me, though who can see into the future. We have some retirement savings thanks to my having been employed by the federal public service for 10 years. I will be receiving a transfer of the future value of my pension soon of about $85k. My husband’s defined contribution plan has about $20k. Thehouse is a long way from paid for.

    The question is, should i continue with the CST for the firstborn or stop? Should I open a family RESP for the other two children? There isn’t a whole lot of cash flow, so i’m leaning toward stopping for the firstborn and using that ($171 a month plus another couple hundred) to fund the RESP for the other two. I’m feeling that the grant money is too good to miss. But i’m not really qualified to do self directed anything…

    I’d appreciate your thoughts.

  194. Pingback: TD e-Series Accounts Not Very Hard to Set Up | Canadian Capitalist

  195. CC, this thread seems cold but I got some pretty good answers about CST plan here in the past. My question now is this:

    The plan (CST Founders) matures and i would like to know whether I will loose money if apply for EAP a year later (my daughter University course is 5 yrs). The EAP payments are mystery to me. Estimates of the value of the plan on annual statements were going down and down, does it indicate that if you delay, there will be even less money and EAP payments next year will be less than this year?

  196. Hello everyone,
    I have to admit, it took me a while to get through this thread. Before I start, I want to point out two things. First of all, I am sales representative of one of the companies that offer RESP. While I truly believe in value of the company I work for, it is something you should feel free to keep in mind while reading my comment. Second thing, I am absolutely disgusted by the amount of deception in this industry. I often begin to think that my job is about defending RESP program, rather than educating people about it.

    I will touch on four major aspects; fees, returns, risk and flexibility. I will add a personal note at the end.

    First thing I will address are fees. The simplest answer to all your comments is nothing is free. Clearly, institutions that use this as their sales tool are good old banks. Banks, basically, offer you two options; GICs and Mutual Funds. Opening RESP with GICs in this account is actually free, but I can tell you that as a future financial adviser I almost never recommend GICs. The rate of return on GICs often does not even beat inflation. Effectively, you are losing value in your assets. In this case, the compounding rate you are missing out on, by far, outweighs any fees you may pay at any other company. Mutual Funds are where you run into what I believe is one of the many examples of deception. All Mutual Funds charge (Management Expense Ratio) MER which in case of RESP funds is at least 2%. One thing with MER’s is that they get charged regardless of whether your fund performs well or not. Again, in term of compounding interest, over the term of up to 18 years, you are losing major income on your deposits and Grants. The fees you face with other companies are in the range of 5% – 15% upfront and often you are eligible to receive that amount back. I will come back to his toward the end but having your RESP with a bank is one of the most flexible options.
    Second thing the average investor or in this case RESP contributor pays attention to are returns. I have already explained the GICs offered by the banks. Most other cases offer fair returns. One thing I would like to caution you with here is the plan estimate/outline you receive. Here is an example:
    A client asks me to show how the contributions and accumulated assets will work over the course of the plan. In finance I prefer to provide a conservative estimate. So in this particular case the outcome I came up with was about $15,000. The client leaves and contacts me a few days later telling me that the other company can provide an end result of $25,000. Thankfully my clients are very loyal and always give me an opportunity to explain myself. I take the same example from previous meeting but this time use 6% percent annual return, instead of original 4%. My outcome now also is a $25,000. Most RESP providers follow the same type of investment so chances are, if you get 5% with one company, you will get approximately 5% with everyone else.
    Exception is mutual funds. Whether you purchase them through a bank RESP program or not, there is a much higher income potential with mutual funds. However, nothing comes without a cost.
    Last thing to pay attention to that I believe is often overlooked is risk. Mutual fund is one of the riskier options for an RESP and I have clients who have their RESPs with banks and earn an annualized return of 0.75%. Less than GICs!!!!
    I am very passionate about my business and wish nothing less of 100% transparency. I don’t mind people having to pay fees, people taking on higher risk or people not earning enough on their investments. Just be aware of what you are doing. Every RESP plan and investment vehicle has to have a Prospectus – a public documentation of funds operations including: strategies, fee structures, penalties, etc. Basically, everything you should read before you commit. However, these are, on average, longer than 50 pages. No one will hide the positive aspect of their company but you NEED to pay attention to the negative aspects. The best way to get this information is to ask a competitor. This is where you will find out about different tricks of this industry.
    I will not disclose who I work for and am trying to be as neutral as possible. I encourage you to find out more information. I hope I can be more help but I think there is a bit of conflict of interest for me here. Understand that this is a long-term financial commitment and it deserves appropriate amount of research.

    • @Gleb: Thank you for your comment. I do have to chime in with one clarification re: fees. Most, but not all mutual funds charge fees of the order of 2%. We think that low-cost mutual funds are suitable vehicles for self-directed RESPs. I’ve addressed elsewhere the fallacy in the argument that Group RESPs return their fees. That’s technically true but in reality, a return of a $1 eighteen years later is not the same $1.

  197. ” All Mutual Funds charge (Management Expense Ratio) MER which in case of RESP funds is at least 2%” . . . Liar.

    Up to, and even more than 2% sometimes. That is if you specifically go out of your way to shop for expensive options so that you can put it in to your scare material to get people in to a vile group RESP plan. At least 2%. Not true in the slightest.

  198. Traciatim, would you please provide me with examples?

    It seem that you are under the impression that I only care to sell RESP and collect my pay check. I am not a liar, at the very best I am misinformed and I apologize for that. This is one of the streams of my business and as with other parts of it, if I can provide a solution that I believe is better to my client, I will.

    Canadian Capitalist, I would love to take this opportunity to compare different options, please provide me with examples as well. I will do research, calculations and hopefully we can all break it down, including things such as fees, earnings, and returns earned and forgone.